2020 financing need reached $ 13.5 billion and remains huge despite renegotiation

Indeed, the official figures presented to bondholders a few weeks ago spoke of the need for 2020 was $ 13.5 billion and that there is a scheduled financing of $ 4.2 billion in multilateral disbursements and $ 2.6 billion from domestic debt. Thus the gap was shortened to $ 6.7 billion.

However, this could be covered by the credit with China and an additional delivery of resources by the International Monetary Fund (IMF) of $ 800 million. The Government assured the holders that the remaining $ 3.5 billion could hardly be covered with adjustment measures.

Therefore, for Acosta Burneo, the $ 1.3 billion in interest that the Government could stop paying this year for the debt renegotiation lowers the gap, but it does not mean that there is money to spend.

He believes that he has wrong interpretations in various sectors, he can even pay domestic debt, when this is impossible. Rather, it considers that the gaps that continue to exist are filled with Cetes or Notes, which is what is about to be approved in the Public Finance Law that now remains in the National Assembly.

For Acosta, what has been achieved with the renegotiation is only to correct one of the symptoms of the serious disease, which is the enormous public spending.

The Fiscal Policy Observatory (OPF) has the figures from another angle, but they are equally worrying. According to Jaime Carrera, executive secretary of the Observatory, currently the deficit (income minus expenses) is $ 6 billion, but to this amount must be added the payment of $ 1 billion of amortizations and the accumulation of $ 3 billion of arrears in those you have incurred. So, to keep the accounts up to date, the government would actually require about $ 10 billion.

It is a very important amount that it is practically impossible to cover it and therefore the Government will seek to survive until the end of the mandate with patch measures. From what is known the transport regime to draw on several routes, he explains. The first is precisely to look for more credits. These days, the Government pushed for a loan for $ 2.4 billion from the Commercial Industrial Bank of China, but encountered some setbacks.

This loan is tied to oil and requires an acceptance from Petroecuador, which considers the oil operation is not convenient for the company and that it could generate losses. As a legal solution, the Government issued Decree 1075 which allows that when the Ministry of Finance requires it, the profitability of the oil company does not have priority, but rather a benefit for the State. Political actors such as César Montúfar and Fernando Villavicencio specifically demand that the decree be unconstitutional.

On the other hand, the Government plans to reach an Extended Facility agreement with the IMF. The possible amounts to be obtained are still unknown, but it ranges from $ 3 billion, considers Carrera. A $ 400 million FLAR loan is also pending. So with all this money ($ 5.4 billion) it is still difficult to close the gap, since $ 4.6 billion would be missing.

So the most certain is that arrears will not be paid (they are currently at $ 3 billion) and that “ball” will be left to roll until the end of the year. Therefore, $ 1.6 billion more is still pending financing. This space can be covered, on the one hand, with internal debt, with papers or bonds, and on the other, it can be added to the arrears item.

ADJUSTMENT
The government reported, in May, several austerity measures that include a cut of at least $ 4 billion. The figure includes the reduction of the wage bill by $ 980 million; $ 400 million less in expenses for goods and services and the fall in investment by $ 1.3 billion. Also, the savings of $ 1.3 billion more in interest.

MEASUREMENTS

However, the salary reduction was based on the reduction of the working hours of the public sector of the Executive Branch (from 8 to 6 hours), with the exception of Health, Police and Armed Forces. We also had to do with the closure of seven public companies and the liquidation of Tame; as well as the elimination of ministries, embassies and consulates. These last measures have already been fulfilled.