Economic figures are not encouraging ahead of the change of command in December 2023. Fiscal difficulties, related to falling revenues, especially from oil companies, low budget execution and low balances in the Treasury Fund are some of the characteristics of the country’s economy, according to Walter Spurrier, director weekly analysis, this week in his discussion “Economy after Lasa”, in which the economic scenarios for 2023 and 2024 were analyzed.

According to the analysis, there is a significant degree of insufficient execution of the budget. Currently, 67% of the year has passed, but consumption barely reaches 59%. And even investment execution has a lower performance (45%). Additionally, arrears due in August reached $1.7 billion.

Meanwhile, the balance in the Treasury account fell to just $271 million, a decrease of $1.4 billion from the previous year. If December were to arrive under the same conditions, there would be problems in covering, for example, the December payment of the Christmas bonus.

The picture also shows the decline in reserves, which once amounted to 9 billion dollars, and now reached 6.9 billion dollars (September 1).

According to the financial plan for 2023 updated since June: “The projection of revenues and expenditures at the level of the fiscal treasury during the fiscal year 2023 does not represent negative balances, however, the dependence on external financing and the placement of internal securities make it necessary ” that there are contingency plans that allow temporary liquidity should be covered…”.

Meanwhile, in the future, the closure of the Yasuní ITT block will reduce oil production by 12%. Currently, this block produces 57.8 thousand bpd. If the faucet is turned off immediately, it could bring HRK 778 million less into the fiscal coffers. The ECB estimates that the loss of these sales means a reduction in GDP growth of 2.9% accumulated over the first four years after dismantling.

In this complex panorama, Spurrier commented on the alternatives that could be taken by a new president who wins the second round of the election.

Both candidates said they could take international reserves. This would mean monetizing the fiscal deficit by issuing Ecuadorian dollars through accounting records in the Central Bank and/or using money from bank reserves, which belong to depositors.

Another option is to shift the bill to citizens by increasing taxes. In the case of Luisa González, from RC, the plan considers the progressivity of tax increases, although it does not say which.

Daniel Noboa, of the ADN, also proposes to raise the tax for the top bracket of personal income tax to 40% (currently 37%), but in exchange will reduce corporate tax to 22% (currently 25%).

Fuel could also become more expensive. On this topic, González talks about focusing subsidies, keeping them only for agriculture and transport; while Noboa does not refer to the object.

Reducing consumption is a way out, but very difficult to achieve. Meanwhile, the capital market is closed to Ecuador, making it difficult to obtain financing.

According to the analysis, in 2023 there is a need for financing of 9.6 billion dollars.

Although the public debt has been reduced, the Government is trying to relax the situation, and for this purpose it has adopted the Decree on Public Finances. However, the possibility that it will be confirmed by the Constitutional Court seems remote.