Minister Simón Cueva highlights the importance of tax reform to reduce deficits and give more resources to GAD and Universities

The Minister of Economy and Finance, Simón Cueva, highlighted this morning that the 2022 budget proforma goes in the direction of continuing to lower the fiscal deficit with permanent resources, in order to give sustainability to public finances, give an image of seriousness and, therefore, attract investments that will serve to reactivate the economy.

Thus, he explained that in 2020 the deficit was about $ 7,000 million, while by 2021 it could close at about $ 4,000 million. While, for 2022, the proforma foresees a deficit of $ 3.5 billion. However, the minister stressed that once the Economic Development Law or tax reform is approved, and if it is possible to do so in the terms provided by the Government, said deficit would decrease and could end at 2.5% in 2022.

The minister highlighted the need for the tax reform to be approved, not only for the reduction of the deficit, but because this – he explained – also the need for financing would decrease, which is now in the range of $ 9.5 billion. He also said that the tax reform would help GAD and university allocations grow, because according to the law, these sectors receive resources according to the volume of permanent income. Right now there is a deficit between permanent income and permanent expenses, due to the fact that this type of income and expenses has been classified in a more transparent way, so that, once again, the approval of the reform would be vital for the budget.

Minister Cueva was in the Guayas Government this morning to talk about both the 2022 budget proforma and the Organic Law of Economic Development and Fiscal Sustainability after the Pandemic (or tax law). Both economic instruments sent by the Government have already been qualified by the CAL and have been sent to the respective commissions for treatment in the next 30 days.

The minister spoke of how they plan to cover the huge financing need, which would reach $ 9.5 billion this year; although, according to a Treasury report, the figure would be more than $ 11 billion. In this sense, he said that a Multilateral financing figure of $ 3 billion, but it could be a higher number, since they have conversations in this regard. He also said that $ 4.5 billion of internal financing would be made up of internal bonds, but also liquidity facilities of various entities of the non-financial public sector. Finally, he said that the $ 1.5 billion in financing expected to come from private companies would not be all from international markets.

The minister He assured that Ecuador has a vocation to return to the markets, but it would seek to do so in an orderly, predictable manner. He said that there has been interest from banks and Wall Street, but the Government has remained very orderly without issuing bonds or collateralized debt, and has instead opted for multilateral debt, which is long-term and low rates.

Meanwhile, Cueva said that the Government is still analyzing the proposals it has for financing the expansion of the Galapagos marine reserve. He said that the president’s announcement had generated interest from various entities and banks, but that for now he could not provide details.

On the other hand, Cueva reported that the Government and the IESS are working on the formulas for the cancellation of obligations that the State has with the entity of Social Security. Among them, it is not ruled out that the monetization of assets or the concession of them could serve for meet these obligations.

Among the items that have been earmarked for Social Security are about $ 2,250 million for IESS, Issfa and Isspol, of which the IESS corresponds to $ 1,580 million.

The minister also recalled that the tax reform points to a greater contribution of at least 6,000 people and conjugal partnerships with assets greater than $ 1 million and $ 2 million, respectively. There is also a special contribution for companies with $ 5 million of equity and over, totaling 1,900 companies in total. He stressed that a series of reductions in VAT are made, for example, for sanitary napkins and other hygiene products. It has also stopped imposing VAT on hybrid or electric cars.