Andean: World Bank and Ecuador kiss and make up
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Andean: World Bank and Ecuador kiss and make up

New loan programme re-establishes relations.

Palacio: in need of fiscal

Ecuador is back in the World Bank’s good books after the multilateral signed off on a new $536 million, three-year programme. The money will be used to fund social projects as well as to help improve Ecuador’s fiscal position. About $90 million will be disbursed this year, $180 million next year and the rest in 2007. The money will be used for healthcare, community development and other social projects. Some cash will also be set aside to help manage the government’s budget.

The deal comes two months after a public spat between the two. In August, the World Bank suspended a $100 million loan to Ecuador at the last minute. The Latin nation’s then-finance minister, Rafael Correa, sent a letter to Bank president Paul Wolfowitz demanding an explanation.

The World Bank had taken exception to the fact that Ecuador had apparently broken some of the promises it had agreed to in its fiscal loan programme, especially by diverting some oil revenues away from debt reduction to social spending. For his part, Correa was furious that the multilateral was trying to dictate Ecuador’s economic policy.

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