After sticks, stones
Ecuadorians have been shocked by shameful political scandals around abuses of political power and corruption that have so far put a Vice President in jail, have demoted the president of the National Assembly and have the Attorney General waiting for an impeachment.
In addition, for the first time in its republican history, Ecuador has suffered five terrorist attacks this month in its northern province of Esmeraldas. The most recent attack killed three members of the Armed Forces and left several injured. These attacks are clearly linked to members of the FARC who did not join the peace treaty with the Colombian government and continue with their narco-trafficking crimes. Thus, the government will be forced to allocate significant additional resources for domestic protection when austerity was at the center of the economic discussion.
This is not the only problem President Moreno must solve in the near term. The results of the debt audit conducted by the General Comptroller have finally been made public and reveal that the legal 40% ceiling of debt to GDP has been largely and long exceeded. In this instance the law requires the government to submit an immediate fiscal adjustment plan and to seek approval from an absolute majority of the Assembly for any further financing.
According to our estimates, the government still needs to raise financing of at least $5000 million for this year. In this context, these operations will have to overcome the domestic and international constraints coming from the abovementioned legal difficulties, as well as the possibility of a more restricted access to markets.
Thus, the submission of the promised economic plan announced for the end of March has raised enormous expectations. People are eager to see if it addresses not only the abovementioned problems, but also the medium and long-term need to recover macroeconomic sustainability though fiscal discipline and innovative measures to solve the structural deficit of the external sector.
The newly appointed Minister of Finance has been vague in her responses regarding important issues such as tax reform, reduction of subsidies and public expenditure. We close this report hoping that the economic plan satisfies all those questions, and we will present updated information upon the analysis of this plan, which will hopefully coincide with the official release of information on the economic performance of Q4 2017.
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