The International Monetary Fund said its executive board approved a $4.2 billion funding facility for Ecuador to support the government's economic policies over the next three years.

The approval allows for the immediate disbursement of $652 million to Ecuador, which has struggled with a large fiscal deficit and high external debt.

"The Ecuadorian authorities are implementing a comprehensive reform program aimed at modernizing the economy and paving the way for strong, sustained, and equitable growth," IMF Managing Director Christine Lagarde said in a statement.

"The aim is to reduce debt-to-GDP ratio through a combination of a wage bill realignment, a careful and gradual optimization of fuel subsidies, a reprioritization of capital and goods and services spending, and a tax reform," she added.

Previously, Ecuador signed funding deals worth $6 billion with multilateral institutions including the Inter-American Development Bank and the World Bank. According to Fitch Ratings, the loans will cushion the country against sovereign financing risks over the medium term.