This year there is a deficit between permanent income and permanent expenses that reaches $ 739 million.
The proforma 2022 reached the Assembly Saturday night with higher permanent expenses, especially in public sector salaries. The Personnel spending will reach $ 9,094.6 million in 2022. This figure is 10% higher than the $ 8,243.2 million that appear in the 2021 codified budget cut to August.
It is striking that This year the deficit is present in both permanent and non-permanent spending, contradicting the macro-fiscal rule that indicates that permanent income must be sufficient to finance permanent expenses. Thus, permanent income they are $ 21,148.8 million, and permanent expenses reach $ 21,888.2. This is a shortfall of $ 739.6 million in permanent income. Additionally, non-permanent expenses reach $ 6,009.8 million, while non-permanent income reaches just $ 2,965.9 million, thus missing $ 3,043.8 million. In total, the deficit reaches $ 3,783.4 million, 3.5% of GDP.
According to Jaime Carrera, executive secretary of the Fiscal Policy Observatory (OPF) permanent expenses had been greater than permanent income for several years now. However, this was not transparent, since previous governments were wrongly recording the personnel costs of certain sectors under the heading of non-permanent expenses. Now, in the 2022 proforma, personnel expenses are better recorded and social protection bonds are also placed as permanent expenses, which is technically correct. In any case, this deficit that exists in permanent spending may be financed, according to the Constitution, exceptionally for non-permanent income, and based on this principle Executive Decree 170 was issued last August.
Although permanent expenses rise, on the other hand there is a significant adjustment in investment spending, which presents an assignment of $ 339.46 million. The figure compared to that codified as of August 31, 2021 registers a decrease of $ 809.46 million. The Ministry of Economy explains that this reduction is mostly due to the fact that the financing of the salary mass of 21,445 officials of the Ministry of Public Health was covered with investment expenditure. According to the Ministry, in order to make the information transparent and locate the resources according to the nature of the expenditure, they will become part of the current payroll of the Ministry of Public Health for a value of $ 394.57 million. Similarly, the Ministry of Education will incorporate 32,923 officials who will be financed with current expenses, for $ 395.41 million.
According to the proforma, the entities that pay the highest resources in personnel spending are Education with $ 2,426 million, Health with $ 1,525 million, National Police with $ 1,320 million, National Defense with $ 1,226 million and Universities and Polytechnic Schools with $ 823 millions.
However, Carrera says that there are still issues to be made transparent since, for example, retirement incentives, which amount to $ 230 million, which are also permanent, are still maintained as non-permanent expenses in the 2022 budget proposal. The expert believes that the future deficit should continue to shrink, reducing expenses in general. Ecuador has a structural problem and that is that permanent expenses (without taking into account the CFDD, which has to do with importation of derivatives) they amount to 75% of total expenses. In other countries this item is between 50% and 60%.
For Carrera, Regarding income, both non-tax, oil and asset sales are overestimated. He explains, for example, that the Government is hoping to obtain $ 985 million, but they do not clearly establish where these resources will come from, they name several possibilities, but there are no certainties, he maintains.
He also considers that oil revenues do not reflect the true dimension of what exports will be. In his calculations, the state would receive about $ 1 billion less than expected.
Carrera indicates that with a deficit like the current one The non-financial public sector surplus of $ 85 million, which is established in the agreements with the International Monetary Fund (IMF) for this year, would not be reached. The Ministry of Economy warned before sending the proforma that the additional income that is expected to be collected by the new tax reform, which is currently in the Assembly and could arrive to $ 1.800 million in two years, will not be reflected in the proforma, since the regulations only allow you to place certain, not projected income.
Meanwhile, the Government plans a average price of crude of $ 59.20, and expects the economy to grow 2.85% of GDP. Inflation (average) calculated for 2022 was set at 1.28%. Additionally, it is expected to reach a volume of controlled oil production equivalent to 179.88 million barrels per year. Regarding the financing needs of the proforma 2022 reach $ 9,768.85 million, the figure represents $ 874.74 million more than the value encoded as of August 2021.
Government meets 0.5% increase for education and health
The Government indicates that the constitutional provision to increase by one 0.5% of GDP the resources destined for education and health. Thus, for fiscal year 2022, the PIB en $ 109,618.57 million, hence the additional budget allocated for initial, basic and baccalaureate education amounts to $ 554.73 million, “Item that reflects the increase in accordance with current legal regulations,” says Finanzas. In total, this year education receives $ 3,419 million.
With regard to the National Health System, the increase in the proforma 2022 amounts to $ 559.13 million, item that represents an increase of 0.5% in relation to the GDP estimated for proforma. In total, the health system will receive $ 3,409.5 million.
Monetization and asset sales advance
The Government establishes in the proforma 2022 that there will be a sale of assets for $ 985 million. And he talks about the monetization and sales of State assets such as the Esmeraldas, Termogás Machala, Monteverde and Sopladora refineries.
Regarding the refinery, it indicates that on July 10, 2020, by Executive Decree No. 1094, the Esmeraldas Refinery project was granted exceptionality for its joint operation between Petroecuador and the private company. Regarding the Termogás Machala project, the State is analyzing an unsolicited proposal to make the necessary investment. Regarding the Sopladora project, the objective of the project would be to hold a tender for the operation and maintenance of the hydroelectric plant. The last project analyzed for possible monetization is the Monteverde Maritime Terminal, its possible delegation is based on the receipt of an unsolicited proposal with the aim of improving, operating and maintaining the storage system. It is planned to continue with the sale of Banco del Pacífico.
Bonds for social protection reach $ 1,470.9 million
The 2022 proforma provides for spending on social protection programs for vulnerable families in the country for a total amount of $ 1,470.93 million, explained the Ministry of Economy and Finance. $ 631.85 million have been allocated for the Human Development Bonus. Meanwhile, the pension for the elderly will represent an expense of $ 391.46 million. The Joaquín Gallegos Lara Bond has resources for $ 123.51 million and finally the pension for people with special abilities reaches $ 109.09 million.
Social protection bonds have grown in Ecuador, especially due to the pandemic, to favor families with fewer resources. Multilateral entities such as the world bank They consider that the delivery of bonds is a properly targeted subsidy that does fulfill its role of alleviating social pressures on the poorest. (I)
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