In 2032 it will be known if the current public debt is reduced to 40% of GDP

The partial veto of the draft Law for the Regulation of Public Finances sets a timetable for 12 years.

Three governments will be required to meet the public debt goal, at least as estimated by the draft Law for the Regulation of Public Finances.

The regulations set out a 12-year program for debt to be reduced to 40% of Gross Domestic Product (GDP). But to this situation are added the country’s financing needs that amount to USD 13.5 billion in 2020, which implies that the Government is obliged to continue to borrow to reduce the deficit and the impact of the pandemic caused by the coronavirus.

Until April 2020, public debt reached USD 57,182 million or the equivalent of 52.14% of GDP, exceeding the long-awaited ceiling of 40% of GDP.

Meanwhile, the Central Bank forecasts that GDP for this year will fall between 7.3% and 9.6% due to factors such as a drop of almost 50% in the international price of oil, the drop in Ecuadorian oil production and the increased public spending.

With this scenario, meeting the fiscal goal of reaching 2021 with a debt / GDP ratio of maximum 40% as foreseen in the 2018 Productive Development Law is difficult.

That is why, in the partial veto of the draft Law for the Regulation of Public Finances, President Lenín Moreno proposes a new schedule that lasts until 2032.

Until 2025, the debt will represent 57% of GDP, by 2030 a reduction to 45% is estimated and that percentage will begin to fall to 40% from 2032. This means that three governments will have to pass to comply with the rule. fiscal.

Only until April, during Moreno’s administration, public debt increased 18.6%.

For the next governments it will represent a challenge, at least this was considered by the secretary of the Fiscal Policy Observatory, Jaime Carrera and the ex-minister of Finance, Mauricio Pozo.

Career indicated that «tough but necessary decisions» should be made, such as reducing the size of the State, especially regarding the wage bill.

Well, however, does not see a promising future. On the contrary, it foresees that the next governments will have the need to continue borrowing, but hopes that they will not do so irresponsibly.

Both agreed that renegotiation is the key. At the moment, Ecuador is carrying out a renegotiation process of USD 17.7 billion of its external debt with its creditors.

Source: Primicias, social networks