Ecuador strikes deal with China to restructure debt

Ecuador has reached an agreement to restructure its debt with Chinese banks, providing relief worth about US$ 1.4 billion until 2025, Reuters reported. 
Ecuador’s President Guillermo Lasso announced in February that he was looking to restructure the country’s debt and improve the conditions of long-term oil sales contracts with Beijing.
China has become Ecuador’s main financial partner in the past decade.

Agreements were reached with both the China Development Bank (CHDB.UL) and Export-Import Bank of China (Eximbank) for loans worth US$ 1.4 billion and US$ 1.8 billion respectively, extending the loans’ maturity and reducing amortisation.
“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,” President Guillermo Lasso media office said in the statement.

Ecuador also managed to reduce certain applicable interest rates and suspend all amortisations with China Eximbank for a six-month grace period, the government said.
The loans were agreed during the government of former President Rafael Correa, while several were linked to long-term oil sales contracts with Chinese companies.

China is the world’s second-largest economy and the biggest bilateral creditor globally, but discloses little about lending conditions or how it renegotiates with borrowers in distress.
The poorest countries face US$ 35 billion in debt-service payments to official and private sector creditors in 2022, with over 40 percent of the total due to China, according to World Bank data.
Sri Lanka is also expected to hold talks with China shortly to restructure the country’s debt with that country.