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IDB - Inter-American Development Bank

12/02/2021 | Press release | Distributed by Public on 12/02/2021 15:34

Ecuador to Promote Economic Recovery with Support from IDB Guarantee

Ecuador will promote sustainable and inclusive economic recovery with a program structured as a $400 million policy-based guarantee (PBG) approved by the Inter-American Development Bank (IDB).

The program will help strengthen the institutional and regulatory framework to improve the business environment, boost international trade, and enhance financial stability and access to financing.

PBGs are financial instruments that facilitate the issuance of a guarantee backed by a sovereign counter guarantee once a country meets a series of agreed-upon policy conditions. This is the first of two consecutive operations under the programmatic policy-based loan (PPB) modality. The operations are independently financed but technically related to one another.

The guarantee will cover future obligations undertaken by Ecuador under a sovereign bond or a loan of up to $400 million. The guarantee can potentially leverage private resources for at least the same amount as those provided by the IDB. It can also improve the overall profile of Ecuador's public debt by reducing borrowing costs and providing longer repayment periods compared to non-guaranteed debt issuance.

The program will support macroeconomic stability and push forward a series of reforms to strengthen the business environment, trade regulation, and the institutional framework for economic recovery and competitiveness. The guarantee will also facilitate trade tariff reduction, streamlining of administrative procedures, increased public-private cooperation to promote investment, and private sector development with an environmental perspective.

It will also promote reforms to strengthen governance to foster monetary and financial stability; enact prudential regulations for an orderly transition towards a stable, post-COVID-19 financial system; expand access to financing; and improve safeguards for financial consumers. The guarantee will support measures within the financial system that are focused on equality and promote the financial inclusion of women.

This operation is in line with IDB's Vision 2025 - Reinvesting in the Americas: A Decade of Opportunities, a plan to promote economic recovery and inclusive growth in Latin America and the Caribbean in the areas of regional integration, productive sector recovery, gender and inclusion, and climate change.

The IDB' policy-based guarantee has a maximum guarantee tenor of up to 20-years.

About us

The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.