All these millions are what Ecuador needs: $5,500 million to cover the deficit, $4,000 for debt and $5,000 million to pay the debt.

Ecuador needs about $14.5 billion in 2024 to cover the deficit, pay off debts and, in addition, to cover large arrears. This is an astronomical figure, for which it is not clear how the Government will deal with it.

Jaime Carrera, executive secretary of the Fiscal Policy Observatory, explains how this big gap in the economy is created:

What did the government do?

The dilemma of how to provide revenue to the state: if the VAT increase is temporary, it is not enough to cover the fiscal gap and would close access to international credits

Additional measures to increase income

This is why Carrera says that what the government is currently achieving is not enough. In this sense, he believes that one option will be to achieve, in addition to VAT, a reduction in public spending by 1,000 million dollars, a measure announced by the Government, but it will be difficult. It could also cut at least 50% of the $2.3 billion in fuel subsidies, leaving the government with about $1.15 billion more.

In addition, Carrera indicates that the Government should take some measures at this time to prevent the closure of the ITT oil block and so that it can continue to receive that average between 800 and 1000 million USD that is expected in the following years. He also explains that this year the amnesty measure would only be sufficient to cover the lack of temporary contribution to assets and the drop in funds after the government of Guillermo Lasso left ineffective the tax reform that had already been approved in the Assembly.

He explains that at least internal depreciation could be done tip overon the other hand, the other 2.5 billion dollars for external debt amortization could come from the multilaterals themselves, but as long as the government is serious.

In any case, it ensures that the Government and the National Assembly must be careful not to contaminate the financial system or dollarization. “In this scenario, weakening the financial system by depriving it of liquidity paves the way for an impact on dollarization.”

Alberto Acosta Burneo, editor weekly analysis, comments that the Government is very far from being able to cover its financial needs, despite the measures it is taking or intends to take. As for Acosta, then surely other types of measures would be needed, such as targeting fuel subsidies, reducing public spending by at least $1,000 million, which can easily be achieved if about 79,000 casual contracts are no longer renewed. . “Nothing is done with one measure, several are needed,” he says.

Effect on international markets

However, Acosta is not in favor of increasing taxes, in this sense he says that spending should be reduced and focus on subsidies. The point is that when more income is received from taxes or other sources, then consumption increases and therefore there is no means for progress.

On the other hand, he says, by taking these measures, which are of a structural nature (subsidies and cuts), and not short-term, the door is opened to the reduction of the country’s risk and access to international markets and multilateral support.

For Acosta Burneo, this is important because by reducing the risk, the due debt can be paid with new financing under better conditions.

Last Monday, the minister pointed out the immediate danger that the deficit, which does not include due obligations and debt repayments, will double this year.

On that occasion, Vega Malo referred to the fact that they are close to multilaterals that see an opportunity for lending. Together with the IMF, they analyze structural measures and the size of the necessary financing from a technical point of view. “If nothing is done, the funding deficit level could reach $10 billion. However, he also said that if the deficit is reduced, a financing scheme will be opened with multilaterals, European governments and the Chinese government.

This is the diagnosis that the government made about the liquidity crisis