Ecuador Turns to IMF for Post-Quake Relief

A devastating earthquake struck Ecuador on April 18. The quake left 659 dead and caused an estimated $2 to $3 billion (US) in property damage. The damage has left Ecuador shattered emotionally and economically.

As a result, Ecuador has reached out to various nation-level lenders to seek help with the rebuilding process. Chief among the organizations with which the Latin American nation is negotiating is the International Monetary Fund (IMF). Ecuador announced the negotiations on Thursday.

A devastating earthquake struck Ecuador on April 18. The quake left 659 dead and caused an estimated $2 to $3 billion (US) in property damage. The damage has left Ecuador shattered emotionally and economically.

As a result, Ecuador has reached out to various nation-level lenders to seek help with the rebuilding process. Chief among the organizations with which the Latin American nation is negotiating is the International Monetary Fund (IMF). Ecuador announced the negotiations on Thursday.

Often seen as the lender of last resort for severely cash-strapped countries, the move reveals how financially distraught Ecuador truly is. The country had already opened an emergency line of credit with other multinational lenders including the World Bank and the Inter-American Development Bank. Total loans to date top about $600 million (U.S.). The announcement of the IMF negotiations reveals that the nation clearly seeks additional financing, and possibly much more.

Although the IMF confirmed on Wednesday that it was in negotiations with Ecuador and that the nation had requested a credit line, it refused to offer further details. For its part, Ecuador’s Planning and Development Secretary, Sandra Naranjo, said “The work has been positive and right now [officials are] in negotiations [with] both the [IMF] and with other multilateral agencies…we have to keep all our options open.” Secretary Naranjo declined to say which other multilateral agencies were involved in Ecuador’s other financial talks.

Some economists have calculated that Ecuador could receive up to $368 million (U.S.) from the IMF credit line, amounting to more than half of what it had collected from all of its previous lenders combined. Those calculations are based on IMF lending criteria; however, the disbursements of those funds depend on how the country wishes to structure its balance of payment needs.

Ecuador’s President, Rafael Correa, has historically been a harsh critic of IMF policies. In the face of as much as an estimated $3 billion (U.S.) in earthquake damage, however, President Correa’s position has mellowed considerably. He now acknowledges that the country will need “tens of millions of dollars” for short-term reconstruction, and possibly much more over the long-term, and that the IMF may be the only way to meet those financial needs.

Much of the reconstruction will have to focus on infrastructure and public service buildings. These will include schools, hospitals, roads, and other facilities. In addition, some 6,600 homes will need to be repaired or rebuilt, and the nation will have to determine how to overcome the loss to its productivity, manpower, and national morale.