QUITO (Reuters) - Ecuadorean President Rafael Correa said on Saturday it would be "really stupid" to abandon the U.S. dollar and vowed to keep the greenback as the OPEC nation's official currency.
Economists fear the leftist Correa will scrap the dollar to better deal with an economy reeling from plummeting oil prices and limited foreign credit after he defaulted on $3.8 billion in sovereign bonds over illegalities charges.
"It will be really stupid to scrap the dollar," Correa said during his weekly media address. "Our government has done more than anyone to protect the dollarized (economy)."
The dollar, adopted as Ecuador's currency in 2000 to halt devaluations after a crippling financial crisis, is widely popular among Ecuadoreans who see it as an anchor of economic stability.
Correa said he will reduce public spending and restrict imports to keep more dollars in the country.
Analysts say lower public spending could hurt Correa's buoyant popularity as he faces re-election in April.
The U.S.-trained economist warned that the global financial crisis "will hit us and hit us hard," and said his government will take "imaginative" measures to counter its effects on the oil-producing nation's poor majority.
He also said his government will face "a grave financing problem" that it plans to tackle by seeking loans from regional lenders and issuing debt for the social security institute to buy. The head of the institute has said it can buy up to $1.2 billion in domestic bonds to help the government.
Correa said he will ask for loans from lenders like the Inter-American Development Bank, Andean Development Corporation and Latin American Reserve Fund. Analysts have warned Ecuador's debt default will severely reduce multilateral credit.
Correa, a former economic minister, also denied rumors he plans to freeze banks' deposits, which were in part fueled by a newspaper ad from major banks who said the government's growing role in the economy jeopardizes the stability of the sector.
He threatened to jail bankers if they issue another statement that sparks rumors among depositors.
Thousands of Ecuadoreans lost their life savings during the 1999 banking collapse that forced the government to freeze deposits to prevent a massive withdraws from hurting liquidity.
(Reporting by Alonso Soto; Editing by Bill Trott)
