The financing need for 2022 reaches $ 11,501 million, according to a Treasury report included in the budget pro forma

The financing needs of the Government reach $ 11,501 million by 2022. This is established in the Justification of the 2022 Budget Proforma delivered the previous Saturday by the Executive to the Assembly, within the report sent by the National Treasury. In said document, signed by Gary Coronel, Undersecretary of the Treasury, All the obligations that the Government has in the coming year and where they plan to obtain the resources are noted down. The origin of the resources to cover the millionaire figure is in the multilateral, domestic debt and even thinking of returning to international markets.

In detail, the expected income is domestic debt bonds for $ 4,734 million; external debt that would reach $ 4,800 million from international organizations (IMF and other multilaterals). It is also planned to obtain $ 250 million from friendly governments and, finally, $ 1.5 billion from private parties.

In accordance with Jaime Carrera, Executive Secretary of the Fiscal Policy Observatory (OPF), These financing needs established by the National Treasury report are the ones that are closest to reality, since in the Savings, Investment, Financing account, which also It is part of the proforma, it is indicated that the financing needs are lower and that they reach $ 9,534 million. In this sense, he believes that the numbers should be harmonized within the ministry both at the budget and the Treasury level.

In any case, returning to the Treasury report, it is not clear what it means to obtain external debt resources with private parties for $ 1,500 million. In this topic, Carrera indicates that within In the proforma 2022, in the income per item it can be seen that the Government has raised placements in the international bond market for $ 1,200 million.

Ecuador stopped placing external debt bonds since it signed its first agreement with the IMF, in the administration of Minister Richard Martínez, in the government of Lenín Moreno, since these placements were extremely onerous due to country risk. So much During the Correa and Moreno governments, foreign debt bonds were issued with very high rates (up to 10.75%), which made our bonds fall into a junk bond category. according to various experts. The fall in country risk could make borrowing in markets cheaper, but for now this indicator still remains high despite having a significant drop when the government of Guillermo Lasso won the elections. As of October 29, it has been placed at 847 points.

Finally, the Government indicates that it will also obtain $ 1,400 million more of “other income”: about $ 700 million from public companies and that are called liquidity management, and another $ 700 that would pass to the following year without being covered. Thus, the expected financing income is $ 11,583 million, that is, $ 81 million more than the needs.

It is that the Government must cover in the first instance the 2022 budget deficit, which reaches $ 3,784 million. But they must also be paid domestic and foreign debt maturities which, according to the Treasury, reach $ 2,260 million and $ 2,454 million, respectively.

In the same document an item called “Others” to establish other pending obligations and that in total reach $ 3,003 million. In this last item there are obligations from previous years for $ 1,200 million, payments for the use of liquidity from public companies for $ 600 million, $ 1,000 million to the IESS and $ 193 million to others.

Refering to internal debt, during the year 2022, maturities of domestic debt bondsa total $ 2,260 million. The Government clarifies in its report that in terms of maturities with private holders, a part corresponds to bonds of public sector retirees and public contractors as payment for the works carried out, there is no possibility of renewing the investments.

But in the part corresponding to private investors, a 60% probability of renewal is assumed. Regarding the maturities with public, which correspond to investments of public financial entities, and the IESS and the Institute of Social Security of the Police (Isspol), it is expected to be able to renew by 75%, 50% and 25%, respectively. Regarding the maturities of investments of public companies, such as the National Telecommunications Corporation (CNT), a probability of renewal of 75% has been considered and for the investments of decentralized autonomous governments (GAD) a probability of 0% has been assumed .

In this sense, a total renewal of 46.55% of the maturities would be expected, that is, $ 1,052 million. This would imply that to reach the expected placements of $ 4,734 million, new placements of $ 3,682 million would be needed. According to the Government, a good part of this additional income would allow the payment of accounts payable from previous years, as well as the payment of obligations of $ 1,000 with the IESS, corresponding to previous years.

Additionally, the Justification indicates that one of the primary objectives of the government plan is aligned with the public debt reduction plan. The reduction strategies are based on fiscal policies to prioritize public spending, as well as labor and administrative structural reforms that are expected to increase potential growth through a strengthening of productive factors.

In that sense, it is expected that by the year 2025 a stock debt of approximately 55.1% of GDP, 8.2 percentage points lower than the projected balance for the end of 2021 of 63.3% of GDP.

They clarify that the reduction of public debt is conditional on the reforms implemented by the Government to restore fiscal sustainability and generate conditions of greater growth improving the competitiveness of the country, promoting national and foreign investment, improving working conditions and fostering favorable conditions for the development of the private sector.