Abstract
Output growth, inflation, and the external current account balance are the major economic developments discussed in this study. The macroeconomic framework was modified to reflect recent information. The reforms in the banking system are helpful in completing the process of dealing with the failed banks. The authorities are contacting international financial experts to manage the debt reductions. Finally, the central government will need to be vigilant in implementing its challenging financing program. The program contains several prior actions to complete the first review.
1. The following information has become available on compliance with prior actions since the staff report was issued to the Board on July 24. This information does not alter the thrust of the staff appraisal.
2. When we distributed the staff report to the Board, the observance of two prior actions (numbers 4 and 6 in Annex I of the Letter of Intent and Supplement to the Memorandum of Economic Policies attached as Appendix IV to the staff report) was not yet known. We can now report that both these prior actions have been observed in the time allowed under the program.
3. Prior action 4 called for the “clearance of all external arrears that could not be rescheduled consistent with the Paris Club agreement.” Based on the information received from the authorities, Ecuador had cleared all the relevant external arrears five days prior to the Board meeting for the first review. Remaining obligations are subject to the conditions set forth in the agreed minute of the Paris Club agreement.
4. Prior action 6 was to “complete the first auction of the restructured private sector debt portfolios of closed banks held in the AGD”. The authorities have notified the staff that they accepted bids, made in the auction of Thursday July 24, 2003, on two loans held by the closed banks in the AGD. Therefore, this prior action also has been observed.