Weekly Report - 07 September 2017 (WR-17-35)

ECUADOR | New budget plan approved. On 31 August, Ecuador’s unicameral national assembly approved a new national budget plan for the remainder of the year, totalling US$36.8bn, of which 39% has already been spent. The assembly voted 75-22 with 34 abstentions in favour of the new budget proposal presented by the government led by President Lenín Moreno. An official statement said that the legislative economic commission has ensured that the project complies with the equation that permanent (regular and recurrent) income does not exceed permanent expenses. It added that the commission has also verified that there is an increase in the budget allocations in both the social area and other budget items linked to the attainment of the country’s development objectives such as education, health, peace & justice, and poverty eradication. The permanent income in the new budget plan is US$20bn while the permanent expenses are around US$19bn, which implies a US$1bn surplus, the president of the economic commission, Pabel Muñoz, said in statements published on the assembly’s website. However, the report on the new budget plan presented by Muñoz to the assembly plenary shows that while this stipulates a permanent fiscal surplus, this is not the case when it comes to ‘non-permanent’ income and expenses, where the projection is for a US$5.89bn deficit. This translates into a full (permanent plus non-permanent) fiscal deficit of US$4.79bn. This deficit was carefully scrutinised and approved by the assembly’s plenary, which is responsible for verifying that the budget plan complies with the national development plan and the government borrowing limits set by law. However, in its report, the assembly’s economic commission included recommendations such as maintaining a constant surveillance of the country’s trade balance, an aspect which is defined as Ecuador’s ‘Achilles’ heel’, since the exclusion of oil revenues from this balance leaves a deficit of over US$1bn. Meanwhile, Muñoz noted that the new budget plan forecast GDP growth of just 0.71% this year. In the last decade, Ecuador’s average annual economic growth was of 3.4%, above the average of 2.5% but such growth now looks out of reach for Ecuador.

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