Ecuador’s consolidated debt falls from 58.8% to 58.3% between August and September, according to new methodology

The Ecuador’s debt indicator fell from 58.88% to 58.38% when comparing August 2021 with September of the same year. This figure went from $62,066.82 million to $61,532.79 million, according to the latest debt bulletin published this Friday night, based on the new methodology applied by the Ministry of Economy and Finance since August.

The ministry, which went five months without publishing debt information, because it was changing the methodology, has promised to publish the 2021 debt bulletins every week until February 11 of this year.

Last Friday, The ministry reported that the change in methodology sought to generate greater transparency in debt data, which also serves to have a clear outlook for an eventual return to international markets. To this end, a series of items have been incorporated and others have been disaggregated. The new methodology was made with technical help from the World Bank, he said. For the ministry, a noteworthy aspect of the new methodology is that the movement of debt is recorded when establishing the initial balance, disbursements, amortizations, interest, commissions, arrears, exchange adjustments and the final balance.

According to the figures, in September the consolidated foreign debt was placed in $44,056.83 million, while the consolidated internal debt was $15,000.78 million; meanwhile, other liabilities were placed at $2,475 million. In August, the external debt had been placed at $44,1356.81; the internal one in $15,644.31 million and the liabilities in $2,285.31 million. In other words, there was a reduction in internal and external debt, but other liabilities increased.

The domestic debt reduction, which is the most important, is recorded in four categories:

• Current fiscal year dependent payment obligations decreased from $1,974 million to $1,489 million (-$485 million).
• Obligations not paid and recorded in closed budgets went from $2,736 million to $2,363 million (-$363 million).
• Cetes obligations went from $2,833 million to $2,799 million between August and September.
• and the obligations of the GADs were also reduced from $1,378 million to $1,344 million.
• Regarding debt obligations with the IESS, these rose between August and September, going from $186.3 million to $394.3 million.

The new methodology also has the figures of aggregate debt of the non-financial public sector. In September, this amounted to $72,499.3 million plus $5,212.6 million of other liabilities. In August, it stood at $73,643.5 million plus liabilities of $5,074 million.

In accordance with Jaime Carrera, executive secretary of the Fiscal Policy Observatory (OPF), it is important to have both the debt indicator and the aggregate debt. The first because it helps establish policies regarding the country’s economy, and the second because it warns about public finances. Is that the debt indicator, according to international regulations, is built with the consolidated debt. This does not include for the calculation debts between entities of the public sector and therefore the debt with the IESS is not recorded. However, the aggregate does show the magnitude of all the obligations that the State has.

Carrera considers that it is important that with the new methodology items such as debt with Schlumberger, which was part of the delivery of the Auca field. On this issue, the debt that was originally $1 billion now stands at $470 million. Cetes are also added, which were previously in a separate classification from aggregate debt. In addition, it seems positive to him that the fliquidity facilities that the State has taken from public companies, among other items.

Regarding the indicator of consolidated debt plus other liabilities, he explained that this is the item that should be gradually reduced until returning to 40% in relation to GDP, which is dictated by the Constitution. According to the Planning and Public Finance Code, the GDP debt ratio must be placed at 57% until the year 2025; in 45% until the year 2030; and 40% of GDP until 2032 and beyond.