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Friday, 13 September, 2002, 05:59 GMT 06:59 UK
Ecuador 'must wait' for IMF cash
Ecuador marketplace
Ecuador's economy shrank by 0.9% in the first three months of the year
Mixed messages are clouding Ecuador's hopes of winning fresh assistance from the International Monetary Fund, with presidential elections just weeks away.

The country's finance minister, Francisco Arosemana, is heading for Washington DC on Friday to present a letter of intent containing the commitments which he hopes will sway the IMF into granting $240m in new loans.

The central bank president, Mauricio Yepez, went on a radio station in the capital, Quito, to say the IMF could agree the letter of intent - and thus come closer to signing off on the loan - the same day.

But IMF sources have told the Reuters news agency that the government is far too confident. No deal, they said, will be made till after the 20 October election.

Holding back

Ecuador needs the money to prime the pump for a wholesale restructuring of its international debts, which amount to about $14bn.

Thus far, the IMF has been holding off - a sign that officials in Washington feel comfortable that Ecuador will escape the fate of close neighbour Argentina and the battering administered to Brazil's currency and markets.

And that looks set to continue, according to Reuters.

Mr Yepez's contention that a deal was around the corner was "just part of the political process" with the election so imminent, the sources told the news agency.

"They have said this many times before, that they are just about to make a deal... It is very difficult to seal an agreement when the elections are just weeks away."

With the exception of Brazil - whose $30bn loan was granted earlier this year despite elections due this month - the IMF generally avoids sealing new deals in the runup to elections to avoid the chance of swaying the result.

Off message

The IMF's caution also stems from Ecuador's breach of agreed conditions in the past.

The country has promised wholesale privatisations in line with the usual IMF requirements, but in the past agreements to cap spending have not been kept.

Some estimates set the funding gap in the $5.6m budget at as much as $350m.

Ecuador's economy shrank by 0.9% in the first quarter of 2002 - the first time the country has posted negative quarterly growth since it adopted the US dollar in April 2000.

The country had seen the strongest economic growth in Latin America last year, and is expected to expand by a further 4% in 2002.



Developing countries

World economy
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10 May 02 | Business
07 Mar 02 | Country profiles
26 Feb 02 | Business
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