By Jose Enrique Arrioja and Bill Faries
Sept. 7 (Bloomberg) -- Ecuador's debt, the highest yielding in Latin America, will be honored as long as economic growth persists and debt payments don't limit spending on social programs, the government's economic coordinator said.
Mauricio Davalos, minister of economic and production policy coordination, said Ecuador has reversed a slowdown in economic growth and forecast an expansion of more than 4 percent in 2008, up from the 3.5 percent he expects this year.
``We've shown that we're honoring our debt,'' Davalos said during an interview in New York. ``We are changing the orientation our economy has had for the past two decades, when the state was removed from its role in development, planning and public investment.''
President Rafael Correa said repeatedly during his campaign last year that the country might default if payments on debt interfere with spending on social programs such as health care and education. The spread, or extra yield, investors demand to own Ecuadorean bonds instead of U.S. Treasuries widened 15 basis points to 7.06 percent, at 3:16 p.m. New York time, according to JPMorgan's EMBI Plus index.
The country's total foreign debt is about $10 billion, according to the government.
Davalos said Ecuador is considering a bond swap that could total $3 billion. He added that Ecuador is completing negotiations to borrow more money from the Inter-American Development Bank and the Andean Development Corporation and doesn't see a need to tap international debt markets at this time.
``We're definitely not growing at our potential,'' Davalos said. ``We don't just want economic growth but an improvement in the quality of life for Ecuadoreans.''
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