Overview

  • Thanks to the boom in oil prices between 2007 and 2014, Ecuador experienced a period of growth and poverty reduction. This boom hid some structural problems, however, such as an inefficient public sector, large macroeconomic imbalances, a lack of stabilization mechanisms and limited private investment. These deficiencies became evident when oil prices fell and the income this commodity generated sharply declined.

    Since 2014, Ecuador has been trying to adapt its economy to a challenging international context characterized by low oil prices, appreciation of the U.S. dollar, increasing external financing costs, and growing trade conflicts. In the absence of fiscal savings, the government began a process of rationalizing public investment and optimizing current expenditures. It has also mobilized different sources of external financing and applied temporary measures to increase non-oil public revenue.

    While the fiscal consolidation underway has reduced the fiscal deficit from a peak of 7.3 percent of GDP in 2016 to 1.2 percent in 2018, there is a long road ahead to achieve sustainable shared prosperity. GDP growth averaged just 0.6 percent between 2015 and 2018, and poverty and the Gini coefficient have remained relatively stable —at around 22.7 percent and 0.47, respectively— since 2014.

    In March 2019, the International Monetary Fund (IMF) approved an agreement with Ecuador to provide support to government economic reforms framed within a broad program of reforms proposed in the 2018-2021 Prosperity Plan. Several international institutions, including the World Bank Group, committed financial support of USD 10 billion to support this plan. The plan includes measures to ensure fiscal sustainability, strengthen the foundations of dollarization, and promote private investment while guaranteeing social protection of the most vulnerable population.

    The IMF conducted its first review of the implementation of the agreement, which confirmed that Ecuador is satisfactorily working towards the advances agreed upon (June 2019). In light of these advances, the World Bank Board of Directors approved an initial Development Policy Loan  (DPL).

    As part of a plan to improve public resource allocation and establish the foundations for sustainable, inclusive growth, the government has continued to implement important structural reforms. These reforms seek to improve public finance management, reduce discretional spending, curb spending on wages and salaries, limit Central Bank financing of the public sector, attract oil sector investments and improve integration into global markets. Recently, the government announced that it will submit a packet of reforms to the National Assembly. These reforms are designed to ease some rigidities in the labor market and streamline the tax and tariff system.

    The implementation of measures to achieve fiscal consolidation and macroeconomic stabilization are crucial for promoting inclusive growth, safeguarding protection mechanisms for the most vulnerable sectors and advancing down the road of shared prosperity.

    Last Updated: Oct 15, 2019

  • On June 11, 2019, the World Bank Board of Directors approved the 2019-2023 Country Partnership Framework (CPF) with Ecuador. This document establishes a funding and technical assistance program to support the country’s development and growth efforts.

    Prepared with the Government of Ecuador and taking into account consultations with different civil society and private sector groups, the CPF addresses the need to support macroeconomic stabilization, protect the most vulnerable sectors and reactivate sustainable growth. To this end, the CPF prioritizes three work areas:

    1. Supporting fundamentals for inclusive growth
    2. Boosting human capital and protecting the vulnerable
    3. Enhancing institutional and environmental sustainability

    Each area has results indicators. To achieve them, the World Bank, the International Finance Corporation (IFC, a WBG institution that supports the private sector) and the Multilateral Investment Guarantee Agency (MIGA, a WBG institution that offers insurance against political and investment risks) will collaborate to increase impact.

    The work areas and objectives established in the 2019-2023 CPF are interrelated and complementary. Developing a human capital with skills adapted to labor market needs, coupled with policies based on evidence and recent information, will drive inclusive growth as well as improve the country’s resilience to disasters and macroeconomic shocks.

    Additionally, more efficient spending and the adoption of international transparency standards in public management will contribute to sustainability and protection of social services. The simultaneous progress of the two first areas will help to improve the country’s access to financial markets and will establish the foundations for strengthening institutions as the country advances down its road to development.

    Ten projects comprise the current portfolio, which total USD 2.1 billion. These projects focus on increasing access to better quality services and to improving infrastructure in transportation, water, sanitation, education and social protection. Some projects seek to improve public spending efficiency and the targeting of social programs.

    Through the technical assistance program, the World Bank finances studies on key aspects of development, including: (i) spending efficiency, (ii) transparency of production sectors, and (iii) human capital development.

    Last Updated: Oct 14, 2019

  • Strengthening of shared prosperity

     

    Results achieved in the Country Partnership Framework

    The World Bank Group and the Government of Ecuador resumed dialogue in 2014. The World Bank prepares analytical studies and lending operations in specific areas in the country. It also prioritizes investments in strategic sectors for development, such as education, transportation, water and sanitation. The analytical studies focus on improving social services and legal frameworks and providing evidence-based information in key areas to continue efforts to reduce poverty and inequalities.

    Increased access to better quality services in education and social protection

    Trust funds financed several advisory and technical assistance services in areas such as combating malnutrition, inclusion of disabled persons and improving the efficiency of the social protection system. Additionally, with a view to building the country’s capacity to produce timely, relevant data for decision-making, the World Bank, together with the National Statistics and Census Institute  (INEC) and SENPLADES, prepared The Poverty Report, 2006 – 2014 and the Poverty and Consumption Inequality Map  2014.

    Integration of reforms in water supply, sanitation, transportation and risk management

    In 2016, the World Bank published a poverty assessment associated with water and sanitation services. To this end, it provided technical assistance to the National Statistics and Census Institute to publish water, sanitation and hygiene indicators for the first time in Ecuador.

    With respect to transportation, the World Bank mobilized resources to build institutional capacities at the national and sub-national levels to compile and produce statistics on traffic accidents through the National Transit Agency.

    It also supported the National Risk Management Secretariat to develop a national disaster response strategy and a methodology to create sector programs in disaster risk management that address a variety of dangers and risks.

    Investment projects in Ecuador

    From July 2013 to June 2015, the World Bank portfolio included three operations (USD 407.5 million) requested by the sub-national governments of Manta, Quito and Guayaquil. In 2016, the Bank approved another operation for the Ibarra government[1] (USD 52.5 million). These operations cover the sectors of transportation, water and sanitation. The World Bank expanded its participation in the agricultural sector[2] to improve incomes of small- and medium-holder farmers through support to the more productive, efficient use of land and water from a climate perspective.  In 2016, it approved an investment operation to raise enrolment and permanence of students in public technical and technological institutes designed and implemented in collaboration with employers, and to strengthen institutional management of technical and technological tertiary education (USD 90.5 million). The World Bank also mobilized an emergency response loan (USD 150 million) to provide aid following the earthquake that affected Ecuador in April 2016. World Bank support focused on reconstruction while other multilateral development banks, such as IDB and CAF, provided support for the initial recovery and immediate response, together with United Nations agencies.

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    [1] Transport Infrastructure Project in Ibarra, Ecuador (P147280) to improve mobility of Ibarra and the use of recreational spaces around Yahuarcocha Lagoon.

    [2] Project to Modernize Sustainable Family Agriculture in Ecuador (P151963).

    Last Updated: Oct 14, 2019

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LENDING

Ecuador: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments


PHOTO GALLERY

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Additional Resources

Country Office Contacts

ECUADOR +5932 294-3600
Calle 12 de Octubre 1830 y Cordero, World Trade Center, Torre B, piso 13. Quito
cmedina1@worldbank.org
USA +1 202 473-1000
1818 H Street NW, Washington, DC 20433
cmedina1@worldbank.org