Ecuador must pay multilaterals, financial markets and banks at least $17,749 million over the next five years. This is shown by the data on the maturity of the public debt published by the Ministry of Finance. According to the data, 11,029 million dollars correspond to amortization payments, and 6,720 million dollars correspond to interest on the same debt.

In 2024 alone, amortization and interest payments must amount to $2.726 million; In 2025, $3.368 million must be paid, and by 2026 the bill rises to $4.010 million.

The large payments occur at a time of low liquidity in the economy and in circumstances where the country does not have access to credit, with a country risk of around 1,700 points (a low figure compared to more than 2,000 points at the beginning of the month), which is high to obtain resources from the financial market.

In the midst of the debate on the possible increase in VAT, as well as the revision of subsidies or other measures that would try to cover the deficit, voices are already being heard from various parliamentary benches talking about debt reprofile (debt extension). payments). , in the case of the Social Christians and even non-fulfillment of obligations (moratorium on debt) at least while the internal war lasts, in the case of the Correísta bench.

However, according to Jaime Carrera, executive secretary of the Observatory for Fiscal Policy (OPF), these options are unlikely.

Carrera explains that in order to access multilateral financing, there must be strong signals from the country. It is an increase in VAT and not only in one point, but in three points that were originally proposed. In addition, work on the issue of targeting fuel subsidies. For the expert, if there is no sustainable reduction of the fiscal deficit, it will be impossible for the country to survive. He also believes that it would be a mistake for multilaterals to deliver important resources to the country without effectively committing to structural reforms in the economy.

He reminded that the multilaterals already made that mistake in the pandemic when they delivered the funds believing that the governments would make reforms in the future, and that did not happen in the end. “The IMF regrets being so flexible,” he explained.

In the meantime, he commented that the country’s risk fell due to the Government’s intention to raise VAT and the very announcement of the subsidy review. However, the 1,700 points he reached are not enough to be able to issue debt at a reasonable rate. A suitable score for the possibility of issuing debt bonds would be between 300 and 400 country risk points. A recent example of this is the placement of $7.5 billion by Mexico, at 6%.

On the other hand, he believes that there is a contradictory message in the Government’s speech since it talks about debt re-profile. According to Carrera, there is no room for debt reprofiling. On the one hand, the external debt bonds, which amount to 23 billion dollars, were recently restructured and there is no room for a new process. On the other hand, with multilaterals this is not possible, but it may be possible to access more financing to cover future interest payments and amortization. This year, Ecuador has to pay 1,000 million dollars to the Monetary Fund: 500 million dollars in interest and another 500 million dollars in amortization (repayment of principal).

According to Alberto Acosta Burne, editor of Analysis Weekly, SPNF’s public debt as a percentage of GDP has been reduced. In November 2023, the debt was 60.8 billion dollars, 50.85% of GDP. In December 2022, it amounted to 62.4 billion dollars or 53.8% of GDP. This trend must go down since the Public Finance Planning Code (Coplafip) states that public debt should return to 40% of GDP in 2032.

He also assures that with the country’s current risk, financing options are limited. Ecuador has already used most of the available quota with multilaterals, although there are still emergency funds for El Niño (IMF and IDB) of approximately USD 500 million each and an IMF resilience fund that could be around USD 1.3 billion ( this line only if we introduce a new program with the IMF). For Acosta Burne, it is crucial to have access to financing and get the accounts in order as depreciation begins to rise significantly from 2025. This issue would not be a problem if Ecuador had enough access to credit to replace that debt with another one in better condition or rolled over.

The cost of default for a country dependent on external financing would be enormous. This would force a fiscal adjustment on the consumption side, exactly what governments have so far refused to do.

For Acosta, the lack of financing will force the Government to permanently resort to internal financing (Biess and the financial system through bank reserves and liquidity ratios). This will make the state the biggest demand for domestic loans, and thus the biggest competitor for domestic savings and greater pressure to increase interest rates.