Economy

Ecuador reaches agreement with China to restructure debt

Ecuador reaches agreement with China to restructure debt

(Reuters) – The government said in a statement on Monday that Ecuador has reached an agreement to restructure its debt with Chinese banks, and provide debt relief by about $1.4 billion through 2025.

Ecuadorean President Guillermo Laso announced in February that he was looking to restructure the country’s debt and improve the terms of long-term oil sales contracts with Beijing.

China has become Ecuador’s main financial partner in the past decade.

Agreements were reached with the China Development Bank and the Export-Import Bank of China (Eximbank) for loans of $1.4 billion and $1.8 billion, respectively, to extend the maturity of the loans and reduce amortization.

โ€œAs a result of these agreements, maturities have been extended to 2027 for China Development Bank and 2032 for Eximbank, allowing for cash flow relief to support government priorities,โ€ the presidentโ€™s press team said in the statement.

The government said Ecuador was also able to lower some applicable interest rates and suspend all amortizations with China Eximbank for a six-month grace period.

The loans were agreed upon during the government of former President Rafael Correa, while many of them were linked to long-term oil sales contracts with Chinese companies.

The statement said the agreements also include freeing up certain quantities of exports to CNPC under oil-backed contracts, allowing Ecuador to sell an unspecified amount of oil at market prices.

State-owned energy company Petroecuador reached an agreement with Petrochina last week over a number of deliveries.

Since taking office last May, Laso has turned to multilateral organizations for funding to revitalize Ecuador’s economy, which has been hit by the coronavirus pandemic, and renegotiated a $6.5 billion credit agreement with the International Monetary Fund, which expires this year.

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The Wall Street Journal first reported on Monday that Lasso announced a deal with China to restructure $4.4 billion in debt.

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