‘Political uncertainty emanating from the Assembly and from pseudo-leaders who seek to cause chaos in society hits the expectations of the markets’

The Government does not anticipate problems to cover the fiscal deficit of this 2023 with sources other than the International Monetary Fund (IMF) and hopes to advance in the targeting of fuel subsidies even if it does not manage to be executed this year. The Minister of Economy, Pablo Arosemena, analyzes the current economic panorama that, despite the positive macroeconomic indicators for Ecuador, fails to lower a high country risk (1,164 points) that he attributes to political uncertainty and for that he blames the National Assembly and ‘leaders ‘ who intend to chaotic society.

Although the deficit is projected to be lower this year, how will it be financed if there is no longer an agreement with the IMF?

We have put an end to the waste of previous governments. In 2020 the fiscal deficit was 7.7 points of GDP. Last year 1.7% and we project that this year the deficit will be 1% of GDP. On the one hand, we aim to have a fiscal surplus at the level of the general budget of the State by 2025, on the other hand we have lowered the public debt from 61% in 2020 to 55%. This helps us to ensure that the financing needs, the money that must be obtained, in 2022 were $9.5 billion and in 2023 it will be $7.5 billion. How are we going to get those resources? Approximately half are resources from abroad, specifically from the Inter-American Development Bank (IDB), the World Bank, the Latin American Reserve Fund (FLAR), the Development Bank of Latin America (CAF), among other multilateral organizations. Also cooperation from governments such as the Japan International Cooperation Agency (Jaica) and the French Development Agency (AFD), to name a few. And then also the internal part where the Government is financed. In this way the financial plan of the Government is perfectly financed.

How do we stay with the IMF?

We maintain a very close working relationship with the IMF. The IMF has congratulated us in Davos, for being one of the few countries in the world that, despite an environment of global slowdown, Ecuador has a strategy of continuing to reduce the fiscal deficit, while increasing economic growth above the regional average.

Has the IMF been asked for $1.3 billion within the aid plan they have for the pandemic?

It has not been done, we are not thinking of doing it, but there are always options on the table, but it is not something that has been done nor are we thinking about it.

In other words, IMF money is not contemplated for financing this year.

Right, no. It is not banned, it is not impossible. It could be in the case that we need it because we have an excellent relationship, but at this point of the road we don’t have it projected because we don’t need it.

Regarding the IESS, where will the funds come from to cover that debt, and is there an agreement with the Biess to finance the Government?

Regarding the first, it is part of the budget. This year we are allocating $2,355 million to the IESS in the budget, which is an additional $769 million to what was there last year. There is to a greater extent the 40% of the State contributions, but there are also other items such as health benefits, VAT refunds as a referential value. Regarding the second, the IESS through the Biess seeks the best investment options and one of the safest with the best profitability is when the Biess invests in government bonds. This has happened historically in Ecuador. The government has never done default to its internal debt, it is a level of debt that allows Biess to have a good profitability.

If the economic indicators stand out as positive, why doesn’t the country risk show that?

Due to the political uncertainty that emanates from the Assembly and from pseudo-leaders who seek to chaoticize society. This political uncertainty affects the expectation that the markets have of the continuity of an economic program that has done Ecuador a lot of good, the economic program of a fiscal nature and a social focus makes the IMF project that we are going to grow above the region and The World Bank says that we are going to grow at 3.1 when the region grows at 1.3, so the reason why country risk is high despite the excellent economic indicators: we have the highest Central Bank International Reserve in the dollarized history of Ecuador, we have an unparalleled drop in the fiscal deficit, we have a drop in financing needs, we have a drop in the level of GDP debt, despite all these positive macroeconomic indicators, we have the second lowest inflation in Latin America in the last year and it is projected to have the lowest inflation in Latin America this year, but political uncertainty is generating that level of distortion.

The import of derivatives has skyrocketed. Is there some kind of adjustment because that costs the State and there are subsidies?

We are looking at other subsidies of different types. In the automotive and transportation sectors, we will continue targeting subsidies in 2023. The targeting of the subsidy to the shrimp industrial sector had been discussed for ten years, this government had to arrive to be able to do it. So with respect to the transport and automotive sector, it will be the Government that is going to make history again, advancing in that targeting.

Is this targeting going to take place this year?

The technical challenge is great, so it may be that the execution could take more than a year, but the progress in that program is going to happen very strongly this year.

Within the parameters agreed upon at the dialogue table, such as cylinder capacity and the number of cars that the person has?

Things can always be improved. We are all interested in Ecuador not allocating almost $4,000 million to subsidize fuel when that is more than the health, education and security budget. What has been agreed is a point of reference and it serves to be able to move forward. (YO)