World Bank approves $400 million in new financing for Ecuador

QUITO (Reuters) - A World Bank official said on Tuesday that the lender had approved $400 million in new financing for Ecuador, as the South American country seeks to improve ties with multilateral lenders that deteriorated under the rule of former President Rafael Correa.

Socialist Correa during his decade-long rule attacked the World Bank and the International Monetary Fund as pawns of Washington and instead sought financing arrangements with China through oil-for-loan agreements.

President Lenin Moreno, a former Correa protege who turned against him after his 2017 election, has questioned the China borrowing schemes and is seeking better ties with the World Bank amid a broader macroeconomic reform effort.

“Our current portfolio of loans and financial assistance in Ecuador is $1 billion, and the good news is that as of Friday we will have expanded that portfolio to $1.4 billion,” said Alberto Rodriguez, World Bank director for Ecuador and four other South American countries, after a meeting with Moreno.

Representatives of Ecuador’s government met last week in Washington with multilateral organizations as Moreno seeks financing to help cut the fiscal deficit to 5.3 percent of gross domestic product from 7.2 percent by the end of the year.

His government hopes in the next few days to win congressional approval for a law providing tax incentives and stimulus for private investment. It is also preparing an austerity plan focused on cutting state expenses.

“We believe that the economic policy that the president is proposing ... promises to achieve long-term macroeconomic stability,” Rodriguez added.

Correa in 2007 expelled the World Bank mission from the country, accusing it of seeking “blackmail” after it suspended a $100 million loan. State prosecutors in April opened an investigation of Correa, who now lives in Belgium, and 10 former officials for alleged mismanagement of public debt.

A mission from the International Monetary Fund will arrive in Quito on Wednesday to carry out a regular assessment of the economy, which would be the first step to propose some kind of agreement in the short term, according to analysts.

“We see multilaterals as an important option in these circumstances,” Ecuadorian Economy Minister Richard Martinez told reporters.

Reporting by Alexandra Valencia and Jose Llangari; Editing by Leslie Adler