A gentle drizzle to calm the ongoing drought

ECUADOR - In Brief 25 Apr 2024 by Magdalena Barreiro

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The Republic closed an extended facility agreement with the IMF for the next 48 months for $4.0 billion. As of last March, we estimated needs of at least $3.5b to give some breathing space to the tight fiscal situation. This estimate was made before the new challenges Ecuador is facing due to the crisis in the electric sector, which requires investment in maintenance and repair of existing facilities plus the purchase of thermoelectric power to close the current deficit of 1000 MW.   Ecuadorians are facing electricity shortages of eight hours per day on average, and there is no light at the end of the tunnel.  Experts estimate that these shortages could continue for at least the next six months, at a cost of $20 million per hour to the productive sector.  Such a situation could soon drain the political capital oPpresident Daniel Noboa, which was boosted on April 21 after his partial victory in the referendum. From this $4b, Ecuador must repay the IMF around $2.76 billion in the coming years—the outstanding balance from past agreements. Thus, close to $1.3b remains for other needs, which summed to with $800 million loan just signed, will help the government to cope with the above-mentioned shortage and other urgent needs. This news comes as a gentle and most anticipated drizzle amidst a threatening fiscal drought.