Ecuador Cuts Fiscal Budget for 2015 by 4%

Finance Minister Says Cut Won’t Affect Economic Growth, Domestic Consumption and Employment

The Wall Street Journal - Mercedes Alvaro 05/01/2015

Finance Minister Says Cut Won’t Affect Economic Growth, Domestic Consumption and Employment

Ecuador said Monday it has cut its fiscal budget for 2015 by about 4% and set it at $34.9 billion, due to the fall in oil prices, its main source of revenue.

In a news release, Finance Minister Fausto Herrera said that following the sharp drop in oil prices, the government took the decision to cut $839.8 million in investment expenditures and $580 million in current spending.

Ecuador's finance minister, Fausto Herrera, said in a statement that the fiscal budget cut for 2015 won’t economic growth, domestic consumption and employment. Reuters
According to the statement, the cut will affect projects “related to imports that can be deferred to the following years but will not affect economic growth, domestic consumption and employment.”

Last November Ecuador’s National Assembly approved a fiscal budget of $36.3 billion for 2015. The current law allows the executive branch to make cuts of up to 15%.

Mr. Herrera said that 2015 will be difficult amid an unfavorable international economic situation, but that Ecuador will continue with projects considered strategic and will implement countercyclical measures. He didn’t provide further details.

Mr. Herrera is part of a delegation that will join President Rafael Correa on an official visit to China, where financing agreements are expected to be signed.

Since 2008 when Ecuador defaulted on about $3.2 billion in global bonds, China has been the main lender to the Andean Country.

Ecuador, the smallest-member of the Organization of the Petroleum Exporting Countries, has budgeted an average oil price of $79.70 per barrel for 2015, but in the last weeks of 2014 its crude oil has sold at levels of about $60 per barrel, according to traders.

During the administration of President Correa, who took office in 2007, the country’s growth has been based on strong public spending, driven by high oil prices as well as increased tax collections.

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