At 8:00 p.m. on March 10, 2020, Lenín Moreno, President of Ecuador, announced a series of adjustment measures to deal with the havoc caused by the global coronavirus crisis and plunging international oil prices. In a nationwide simultaneous broadcast, he underscored that the government’s general budget for this year had been prepared in a scenario with oil at US$ 55 per barrel, and estimated that losses would be US$ 8 million per day in income for Ecuador due to the drop in the international price of oil.
The adjustment measures were taken on four fronts, summarized as follows:
- Austerity
a) An additional 2020 budget cut of US$ 1.4 billion:
- US$ 800 million in goods and services and
- US$ 600 million in capital goods.
He clarified that the cutback will not affect the health sector.
b) Elimination of the Secretariat of Youth, 4 regulatory and control agencies, 3 institutes, 3 government corporations, 4 technical secretariats, and the public media company.
c) Temporary contribution, for an unspecified time and amount, of a percentage of public sector employees’ salaries.
d) Proposal to the National Assembly to have owners of vehicles assessed at over US$ 20 thousand to pay a one-time contribution of 5% of the assessed value.
- Enhanced foreign debt conditions
a) Credit arrangements underway with two international finance institutions (unspecified) for approximately US$ 2 billion under better conditions than those offered by international markets at present.
b) Arrangements underway to reschedule maturities on bilateral debt to bring them in line with the country’s new reality.
- Increase in withholdings at source of buisness income tax.
a) Increase of 0.75% in income tax withholdings at source of companies in the banking, oil, telecom and other sectors.
- Bill of law for reforms in the Planning and Public Finance Code.
a) Urgent economic proposal to National Assembly of a bill of law for reforms in the Planning and Public Finance Code.