The Ecuadorian Parliament on Thursday approved a bill aimed at securing the dollarization implemented in the country in 2000 as part of the country’s commitments to the International Monetary Fund (IMF). The Ecuadorian National Assembly gave the green light to this so-called “dollarization defense” law by 86 votes to 41, one blank vote and seven abstentions.
The text had previously been rejected twice on technical grounds. It must now be sent to President Lenín Moreno for promulgation.
Austerity measures initiated
Ecuador dollarized its economy in March 2000 following a banking crisis, which caused losses estimated at more than 5 billion dollars (4.16 billion euros) for this small oil country of 17.4 million. inhabitants.
The passage of this law is part of Ecuador’s commitments to the IMF, which granted a loan of 4.2 billion dollars (3.49 billion euros) in March 2019 then another 6.5 billion ( 5.4 billion euros) last September. In addition to austerity measures, the IMF imposed more taxes, anti-corruption rules, increased VAT and a law giving independence to the Central Bank.
The plan also provides for the country to reduce the total weight of its debt to 57% of GDP, including internal debt.
“Sufficient autonomy” for the Central Bank of Ecuador
“It is good news that the Ecuadorian Assembly has approved the dollarization defense law,” the Minister of the Government (Interior) reacted on Twitter. “The reserves of the Central Bank are protected, the citizens’ deposits are safe, the organization recovers its autonomy”.
The law establishes that the Central Bank of Ecuador will enjoy “sufficient autonomy”, according to Congress.
The text also prohibits the central bank from using its foreign currency reserves to finance the government, and provides for a financial regulatory council to define maximum interest rates for bank loans.