Ecuador IMF deal will stoke sociopolitical tensions

Significance

The agreement will last for 48 months and includes an immediate disbursement of USD1bn. It will provide much-needed, short-term fiscal relief for the government and increase investor confidence, potentially helping to boost sluggish economic growth. However, the conditions attached will generate sociopolitical unrest, challenging Noboa ahead of next year’s elections. Deteriorating executive-legislative relations will bring further complications.

Impacts

• The IMF deal will increase Noboa’s options for raising funds on international financial markets but interest rates will remain elevated.
• The IMF loan will increase the overseas debt burden and debt servicing for future governments.
• Increased militarisation will not prevent protests but might result in increased state violence and repression.