After reaching one of the highest levels since the start of dollarization in January 2023, International Reserves (IR) stood at USD 4.45 billion on December 31, 2023. This reserve level allowed covering 100% of the liabilities of the first balance system of the Central Bank of Ecuador (BCE) and 43% of the second. In other words, the BCE can currently cover with liquid assets the entirety of deposits held by BanEcuador, private financial institutions, and popular and solidarity economy entities in the Central Bank. Despite recording a year-on-year reduction of 47.3% as of December 2023 compared to dollarization, when comparing the IR level at the close of each year.
The decline in International Reserves from USD 8.46 billion in December 2022 to USD 4.45 billion in December 2023 is mainly attributed to negative cash flows in the public sector.
Source: Central Bank of Ecuador
Net value of public sector transfers includes the net values between disbursements and payments for external debt, import and export of hydrocarbons, and transfers of the public sector with foreign entities. Public sector movements resulted in a reduction of IR by USD 2.45 billion. This decrease is mainly explained by negative net values of public external debt, as well as public sector transfers and lower flow of hydrocarbons.
Source: Central Bank of Ecuador
Regarding flows for public external debt, given the conclusion of the program with the International Monetary Fund and the recent political situation, the Ecuadorian State received significantly lower disbursements than the years before the pandemic. Thus, the National Government received USD 2.29 billion from international creditors in 2023, recording a 50% reduction compared to 2022.
Source: Central Bank of Ecuador
In addition, the external debt service, which includes capital amortization, interest, and commissions, stood at USD 4.08 billion in 2023, representing an increase of USD 494 million compared to the previous year. It is important to mention that the payments made for external debt service in 2023 are significantly lower than the amount paid between 2018 and 2019.
Source: Central Bank of Ecuador
On the other hand, net transfers with foreign entities carried out by the private sector (households and companies) in 2023 were lower than pre-pandemic levels, amounting to USD -1.4 billion. It is worth noting that the value of these transfers has historically been negative, with the exception of 2016 when safeguards were implemented, which increased the cost of imported raw materials and goods.
Source: Central Bank of Ecuador
In 2023, the difference between deposits and cash withdrawals from BCE vaults by entities of the national financial system had a negative flow of USD 107 million. Historically, this behavior demonstrates a lower demand for cash since 2014, with the exception of 2022 when this indicator reported a positive flow. The result is also consistent with the increased use of digital payments by the public.
Note: Includes withdrawals and deposits made by BanEcuador
Source: Central Bank of Ecuador
The high level of International Reserves recorded between the end of 2020 and the beginning of 2023 allowed the correct functioning of the dollarization system and contributed to the post-pandemic economic recovery. Furthermore, this high level of reserves guaranteed the provision of currency nationally and payments abroad requested by depositors of the financial system and public, private, and popular and solidarity economy entities.
The Central Bank of Ecuador reaffirms its commitment to strengthening dollarization and the robustness of the monetary system.
