IMF Prepares Ecuador Credit Line as Government Starts Debt Talks

(Bloomberg) -- The International Monetary Fund is preparing a new credit line for Ecuador as the nation faces a selloff in crude oil and one of Latin America's worst Covid-19 outbreaks, according to people familiar with the matter.

The Washington-based lender is discussing a loan of about $250 million as part of the South American nation's rapid financing instrument, as well as further funding through a successor accord, said the people, who requested anonymity because the talks are private.

Ecuador, which once went 180 years without repaying a bond, needs to finance a budget gap that some analysts have estimated will reach as much as $8 billion this year. President Lenin Moreno's administration is also starting restructuring talks with bondholders this week and negotiating the final terms of a loan from China as it battles a pandemic that has cost at least 3,400 lives.

Still, there's an obstacle in the negotiating process. Ecuador's presidential election next February could sweep in an opposition candidate or political outsider. Moreno has said he won't seek re-election.

Anna Ivanova, the IMF's mission chief for Ecuador, has had talks with opposition leaders in the Social Christian Party and CREO Party as well as other key stakeholders, the people said. Former Guayaquil mayor Jaime Nebot of the Social Christian Party and businessman Guillermo Lasso of CREO are two presidential candidates viewed more favorably by markets.

The IMF believes there's a reasonable chance that the new government will be pro-reform, although it's preparing for the risk that the next administration rejects its plans, the people said.

The IMF's spokesman Gerry Rice said staff members are working closely with authorities on a successor program that will bolster Ecuador's economic performance, strengthen its dollarization framework and stabilize the economy.