The International Monetary Fund (IMF) has approved a $4 billion lending agreement for Ecuador to support President Daniel Noboa’s efforts to stabilize public finances amid a security crisis. This four-year Extended Fund Facility includes an immediate disbursement of $1 billion, with $800 million allocated to repay a bridge loan from the development bank CAF.

IMF Managing Director Kristalina Georgieva commended Noboa’s ambitious fiscal consolidation plan to address Ecuador’s fiscal vulnerabilities and ensure medium-term stability. Noboa, who declared a war on drug trafficking gangs in January, aims to reduce Ecuador’s deficit to around 4% of GDP this year, down from 5% in 2023 under his predecessor.

This IMF deal follows a previous $7.4 billion agreement that ended in 2022 and will unlock additional loans exceeding $8 billion from multilateral lenders like the World Bank and Inter-American Development Bank. To secure the agreement, Noboa raised the value-added tax from 12% to 15% in February.

Despite initial gains, Ecuadorian bonds have lost some value due to a decline in Noboa’s approval rating, raising investor concerns about potential voter backlash in the February 2025 election.

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