By Nathan Gill
(Bloomberg) -- The Export-Import Bank of China granted Ecuador a $5.3 billion credit line after a slide in oil to an almost six-year low prompted spending cuts for the OPEC member.
Finance Minister Fausto Herrera said in a statement published today in the president’s official gazette that the Andean nation will use about $1.5 billion of the funds this year to finance public-work projects such as irrigation and transportation. The credit line will have a 30-year maturity and an interest rate of 2 percent, according to the statement.
President Rafael Correa, a 51-year-old former economics professor, traveled to China this week to ask for loans to help prop up public spending after the price of crude, Ecuador’s biggest export, plunged to its lowest level since April 2009. The government announced yesterday that it would cut the 2015 budget by $1.42 billion, or almost 4 percent, because of a decline in oil revenue.
China “is very interested in continuing to finance because of the seriousness of the government and our ability to execute and plan,” Correa said in a separate statement published today in the presidential gazette. “The price of oil has kept changing, which makes it necessary to respond with adjustments.”
Ecuador also said today that China will loan an additional $250 million to help switch kitchen stoves to electricity from natural gas. The Andean country said yesterday that China will provide $24 million in development funding for education, rural security and customs inspections.
Oil slumped about 50 percent in 2014, the most since the 2008 financial crisis, after the Organization of Petroleum Exporting Countries resisted calls to cut output as it competes with U.S. producers.