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Market News

UPDATE 1-Ecuador approves law granting autonomy to central bank

(Updates with rally in Ecuadorean bonds)

QUITO, April 23 (Reuters) - Ecuador’s National Assembly approved a law late on Thursday granting autonomy to its central bank, a move celebrated by President Lenin Moreno’s government on Friday as a step toward economic stability.

Moreno’s market-friendly administration had pushed the reform as a way to prevent future governments from draining the bank’s reserves to finance public spending, a practice his allies allege was common during leftist former President Rafael Correa’s administration.

Economy Minister Mauricio Pozo said the measure would help protect Ecuador’s dollarized economic model.

“This is a very important step forward for stability, for dollarization, for the economy,” Pozo told Radio Democracia in Quito.

Ecuador’s bonds rallied on Friday, with the 2030 note up more than 3 cents to a record 82.75.

The bill passed with the support of 86 of the 135 lawmakers present in the Thursday session. Forty-one lawmakers voted against the proposal, labeling it a privatization of the central bank.

The reform had been a condition of a $6.5 billion package agreed last year with the International Monetary Fund (IMF), after one of the region’s worst coronavirus outbreaks and the plunge in crude prices reduced the oil-exporting country’s government revenue.

Moreno leaves office on May 24. His successor, president-elect Guillermo Lasso, is expected to broadly continue his market-friendly policies, though Lasso has voiced opposition to an IMF proposal to raise some taxes to help the government reduce its budget deficit. (Reporting by Alexandra Valencia, additional reporting by Rodrigo Campos, Writing by Luc Cohen, Editing by Louise Heavens and Peter Graff)

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