Ecuador studies external financing to mitigate 2019 deficit
12 octubre 2018

On Tuesday, October 9th, Finance Minister Richard Martinez announced that the Executive expects a deficit of 3.2% of GDP by 2019. This means that the government will have to finance US$8100 million. To address this the Executive is considering contracting debt with multilateral credit organizations, deepening trade relations with China or issuing new sovereign bonds in the private market. For the moment, these are possibilties that the Executive is analyzing. It is highly probable that by November 1st, with the presentation of the 2019 Budget, the government of President Lenín Moreno will choose one of these or a combination of all of them.

 

In order to cover the 8 billion dollars deficit, the Executive is considering three options. In first place, they are considering contracting debts with multilateral credit organizations. This year, relations with the International Monetary Fund (IMF) and the Inter-American Development Bank (IDB) have been strengthened, and they are among the most probable options.

 

Another option is to strengthen commercial ties with China, deepening the sale of oil in exchange for financiation. Finally, there is speculation about entering the international sovereign bond market. This last option is the most complicated due to Ecuador’s high country risk and the increase in interest rates in the United States, which makes the debt rates that the country should pay more expensive.

 

The first estimates of the 2019 National Budget show a deficit of 8100 million dollars. Before this, Martínez assured that “we have all the roads open, as a result of the work carried out this year to reintegrate the country to the world”.

 

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