China restructures Ecuador debt amidst country's economic challenges
Ecuadorian President announces an agreement with China on debt relief to save the country $1 billion until 2025.
The government of Ecuador announced on Monday that it has reached a deal with China to restructure debts.
The new agreements with Chinese Banks will provide Ecuador with a $1.4 billion debt relief till 2025.
Last February, President Guillermo Lasso announced plans to restructure the country's debt as it faces the economic fall-out of the Covid period and challenges in the current world economy.
The agreements would allow Ecuador to reduce the amortization and extend the maturity on a $1.4 billion loan from the China Development Bank while extending the maturity of a loan worth $1.8 billion to the Export-Import Bank of China (Eximbank) as well as suspending all amortizations and reducing some interest rates for a six-months grace period.
In a statement, the President's press team said, "As a result of these agreements, the maturities are extended to 2027 for China Development Bank and 2032 for Eximbank, allowing the cash-flow relief to support government priorities."
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Oil contracts were also revisited, as state-owned company Petroecuador announced last week reaching a deal with Chinese Oil Company CNPC to extend oil deliveries from 2024 until 2027, which would allow Ecuador to sell certain amounts to the market, and given current high oil prices, Petroecuador stated that this deal will bring in around $709 million in revenue through 2027.
Ecuador's economy is heavily reliant on oil earnings, with exports accounting for 65% of total output in the first four months of 2022.
President Lasso said that the agreements are expected to save the country $1 billion.
It's noteworthy that in the past few months, tens of thousands of protesters took part in a statewide demonstration against mounting hardship in the economy.
The powerful Confederation of Indigenous Nationalities of Ecuador (Conaie) - which represents more than one million of Ecuador's 17.7 million inhabitants - called for the protests to demand cheaper fuel and food price controls that were joined by students, workers, and others.
Protesters called for a reduction in already subsidized gasoline costs, which have risen substantially in recent months, as well as jobs, price restrictions on food, and increased government investment in healthcare and education.