Ecuador
Ecuador has resorted to IMF programmes repeatedly, including in 2016, 2019 and again in 2020 and 2024. While the 2016 programme was a loan under the Rapid Financing Instrument (RFI) to address urgent balance of payments needs and support reconstruction efforts after the Manabí-Esmeraldas earthquake, the 2019, 2020 and 2024 Extended Fund Facility (EFF) programmes came in the context of the Covid-19 and later security crises. Despite the varying circumstances, these programmes reflect a continuous effort by the Fund together with Ecuador’s economic elites to institutionalise policies of fiscal consolidation, privatisation, labour flexibilisation, and restricting the role of the Central Bank.
These programmes imposed severe austerity targets including a target cut of 50,000 public workers that led to thousands of layoffs in 2019-2020, a 64% budget cut in the healthcare sector over 2017-2019, as well as major strikes and protests. As a result, Ecuador experienced an exceptionally high rate of excess deaths during the Covid-19 pandemic, struggling to mount an effective pandemic response. Research has highlighted the gendered effects of these policies in a context where women make up 60% of the healthcare workforce and 85% of nurses, maternal mortality worsened from 37 to almost 58 deaths per 100,000 women between 2019 and 2020, and unpaid care work and consumer debt increased as women absorb diminishing public services.
The Fund’s emergency financing loan issued at the height of the pandemic in May 2020 still projected “fiscal consolidation… of about 6.2 percentage points of GDP during the period 2019-2025”, while health budget cuts and public worker firings continued. Making use of the state of emergency declared in March, the Moreno government pushed through labour, tax, and fuel subsidy reforms as well as the guarantee of external debt payment – all previously opposed by popular and (on tax) even parliamentary opposition.
Another $6.5 billion loan was agreed in September 2020. Among a host of austerity measures meant to cut the primary deficit by 5.5% of GDP until 2025, the IMF proposed further public wage bill cuts, labour flexibilisation, central bank independence, and expanding foreign investment in resource extraction. Curiously, this programme was one of the rare cases that included a distributional impact assessment, evaluating how different economic policies and social assistance measures would impact each income decile. It also defined a social safety net coverage target (80% of the poorest 30%) – instead of a spending floor – to mitigate policies such as fuel subsidy removal, likely in response to Indigenous-led public protests in 2019 opposing the previous IMF programme that had sought to remove fuel subsidies without appropriate measures to mitigate its impacts on people on low incomes.
However, this expansion took longer than expected due to the practical challenges with targeted transfer programmes in reaching the intended beneficiaries, while a significant additional share of the population was pushed into poverty in the meantime (in the first three months, poverty jumped from 25% to 37%, already up from 21.5% in 2017, peaking at an average of 33% in 2020 and falling again to 28% in 2021 and 25% in 2022). The concurrent deterioration of health and social services overall, as well as major increase in the cost of living, high unemployment resulting from the pandemic, and global inflation rendered the additional benefits almost irrelevant. In June 2022, protests once again gripped the country, accusing the 2021-elected Lasso government of neglecting the wellbeing of indigenous communities under pressure from the IMF.
These austerity measures have not only gutted Ecuador’s already weak public health and social protection systems but have also undermined its ability to implement climate measures – and with oil revenue making up almost 40% of the government’s budget, the fiscal targets implicitly depend on continued extraction. Unsurprisingly, the government made plans to double oil production by 2025, with the Fund’s endorsement – the 2024 EFF lists “implementing plans to increase oil production while remaining mindful of risks associated with stranded assets and including the promotion of greater private participation” as well as “further improving the targeting of subsidies” as “essential to support the fiscal consolidation strategy”. The ongoing debt stress and fiscal squeeze have also put the spotlight on opaque market solutions like debt-for-nature swaps, of which Ecuador announced two in 2023 and 2024 to exchange improved debt conditions for marine and forest protection, putting key decisions around environmental protection into private hands.
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