Ecuador's Lawmakers Vote To End Ctrl Bank Autonomy

QUITO (Dow Jones)--Ecuador's lawmakers voted overwhelmingly Thursday to essentially end the Central Bank's autonomy, and it's widely believed that President Rafael Correa will sign the bill into law in the next few days.

Correa harshly criticized the central bank after taking office in early 2007, and he has steadily gained control over the institution by replacing key officials.

Ecuador's dollarized economy means the central bank has very little sway over monetary policy even as it manages public sector accounts.

Observers have criticized the bank for long delays in releasing economic indicators, and have also called into question the accuracy of some of its data and forecasts.

The legislative body voted 52-to-11 to modify the law governing the structure of the central bank, giving the executive branch effective control over it.

Newspaper El Comercio said that under the new legislation, the country's president will chair the bank's board of directors. The ministers of finance, political economy, production and the national secretary of planning will also sit on the board, the newspaper reported.

Correa had accused central bank employees of publishing incorrect data to harm his government, and has threatened to fire the employees.

The central bank hired external auditors to verify its data and to revise its methodology, and several statistics and forecasts were unavailable for months. The results of the external audit, which had concluded, were never made public.

Mauricio Pareja, a former central bank general manager, said the reform would mean that Ecuador won't have an impartial source of economic data. "The ministers will make monetary policy and they will evaluate it themselves. The legislature totally has eliminated autonomy," he said.

Jaime Carrera, with think-tank Observatorio de la Politica Fiscal, said the measure would essentially make the central bank "fit the political needs of the government.

"Since Correa took the office, little by little he has weakened the Central Bank, handing over its operations to other institutions, and achieving a majority of like-minded people on the board of directors, so the credibility of the Central Bank was lost a long time ago and now they are only giving legal outline to a de-facto situation," he said.

Correa, a self-avowed socialist, has steadily increased the role of the central government in the economy.