Ecuador sees $100 mln cushion if oil prices fall

www.forbes.com Reuters, 03.20.03, 12:04 PM ET

QUITO, Ecuador, March 20 (Reuters) - After receiving high prices for its crude in the first quarter of 2003, Ecuador has a $100 million cushion should oil prices fall following war in Iraq, the Central Bank said on Thursday.

Central Bank president Mauricio Yepez told reporters the oil-dependent nation has secured an average of $29 per barrel of crude so far this year, well above the $18-per-barrel price forecast in the central government's $6.7 billion budget.

These high oil prices -- which were stoked by tensions in Iraq and unrest in Venezuela -- should inject $100 million into a government stabilization fund by the end of March, providing an ample cushion should crude prices fall, he said.

"Nearly three months have passed in this fiscal year and the average price we've been selling our crude at is $29 (a barrel). This gives us a rather large cushion," Yepez said. "Even if oil prices fall below $18 per barrel, we won't have any difficulties in executing the (economic) program."

Oil prices tumbled to three-month lows on Thursday after the United States began bombing Iraq and dealers bet on a swift U.S. victory with little disruption to Middle East supply.

Ecuador is relying on oil -- its biggest export-- for about 22 percent of the central government budget this year.

The country stores additional revenues in a stabilization fund to bolster the budget should prices fall. But if prices exceeded the per-barrel price forecast for the year, excess revenues would be earmarked for local agencies and institutions.

Yepez added he hoped the International Monetary Fund's executive board would approve a vital $200 million loan backing the cash-strapped nation's economic program on Friday.