Country risk in Ecuador fell by 71 points to 1968 points at the end of last week. And that after he recorded 2,039 points on January 9, in the midst of the declaration of an internal war in the fight against drug trafficking and terrorism.
For the week of January 8, this indicator, which measures the ability of countries to meet their debt obligations, started at 1,957 points, but a day after the day of violence experienced by Ecuador, it jumped to 2,039 – 82 points at once. On Wednesday, it fell slightly to 2,018, and on Thursday to 2,011. It fell further on Friday, to 1,968 points, hours before President Daniel Noboa sent to the National Assembly an emergency bill to increase the value-added tax (VAT) from 12 percent to 15 percent.
New country risk, which is still high and prevents the country from accessing credit, would be reduced due to several factors. A kind of mixture, says former economy minister Mauricio Pozo.
First of all, Pozo explains that the country’s risk can be reduced based on continuous work to improve public finances and if the country’s security recovers. “The trend of this indicator can be shifted by the persistence of public policies.”
However, he believes that this decline is not bad, but there is still a long way to go to access financing from the international market.
For Pozo, it is a good sign that the president is looking for a way to get permanent funds, such as income from three more VAT points. In addition, positive developments have been made in the area of security.
However, he assures that one should not lose sight of the fact that the problem of public finances is enormous: there is a deficit of 5.7 billion dollars and an additional 4 billion dollars in unpaid obligations.
He explains that this huge lack of funds cannot be fixed by VAT alone or channeling subsidies, which are issues under discussion. For Pozo, a comprehensive problem management program must be put together, adopting various actions, such as working on spending, renegotiating the debt and seeking debt financing through multilaterals.
Source: Eluniverso
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