IMF staff reached an agreement with Ecuador on Friday on a $6.5 billion, 27-month loan program to help the country deal with the dual shock of and the plunge in oil prices.

The IMF said the Extended Fund Facility follows Quito’s successful renegotiation with bondholders, and complements a $643 million emergency loan the Washington-based crisis lender provided in May.

The new loan is subject to approval by the IMF board.

“Ecuador’s already fragile economy has been further hit by a confluence of shocks, including the COVID-19 pandemic and the sharp slump in oil prices, which is expected to lead to a record decline in economic activity,” said Ceyda Oner, the IMF mission chief who led the virtual talks with Ecuadoran officials over the past month.

The economy is expected to contract by 11 percent in 2020, “and many Ecuadorians are being pushed into poverty,” she said in a statement.

“Against this backdrop, the Fund-supported program is aimed at first helping the Ecuadorian authorities stabilize the economy and protect the lives and livelihoods of the Ecuadorian people, and then preparing the ground for economic recovery and promoting sustainable and inclusive growth.”

The government of President Lenin Moreno  in late July reached an agreement on  $17.4 billion in debt that reduced the South American nation’s capital and interest payments.

In the deal with the fund, Ecuador agreed to a reform program that includes rolling back crisis spending next year to pursue “a smart and comprehensive tax reform, and improved governance of public spending, while continuing to expand the coverage of social protection.”

Read original article here.