In the last government of Rafael Correa and the administration of Lenín Moreno, the country’s indebtedness accelerated.
Without taking into account short-term debts with suppliers, local governments and other entities, such as the Ecuadorian Social Security Institute (IESS)the state borrowing exceeded $67,358 million, cut to January 31, 2022.
About 60% of these obligations, which are paid with taxes and the efforts of citizens, originate the «economic chuchaqui», resulting from the waste of the second oil boom (between 2007 and 2014).
Fausto Ortiz, former Minister of Economy, explained that, after the extraordinary income of the Petroleummost of the current debt was contracted in the eight years prior to the current government, that is, during the last administration of Rafael Correa and the only period Lenin Moreno.
Between 2013 and 2020, the fiscal deficit averaged $5 billion a year. This represented more than $40 billion in new debt just to plug the hole of a General State Budget (PGE) with less and less income and more and more expenses.
The worst thing about this already complex scenario is that about a third of that debt, or more than $14.5 billion, was offset by losses caused by importing fuel and selling it at subsidized prices in the local market. This value does not take into account what is lost due to poor quality production in the three national refineries.
Thus, we get into debt, and we continue to pay billions of dollars annually, to maintain an inefficient oil systeminstead of investing more in priority sectors such as health and education.
We don’t learn from mistakes
The government of William Lasso projected a deficit of $3,767 million until the end of 2022. With the extraordinary collection of the tax reform, that deficit could drop to $2,500 million.
If the price of crude oil barrel Ecuadorian averages between $80 and $83 until the end of the year (more than $90 for WTI), the additional income for the treasury could be $1,000 million. This means that, in the best of cases, the country’s fiscal deficit could fall to $1.5 billion.
However, the intentions of Assembly to repeal the tax reform and the recent approval of the salary increase for teachers, could ‘eat in one fell swoop’ all the extra income for 2022.
To reduce that impact, the current government has announced that the higher salaries for teachers will be paid gradually, according to the availability of resources.
Despite this measure, Ortiz considered that the political and social pressures to spend the “new bonanza” are still latent and increasing, which could cause a return to waste another chance to have fiscal accounts more in line with the reality of the country.
Not only that the export sectors hit by the war between Russia and Ukraine they ask for help; but the waste of the two previous governments have left shortcomings in the road and health system. These shortcomings force older emergency expenses, which are not within the budget for this year. (JS)
