Federal contribution to local governments will drop 8% to 10% in 2016

Ecuador Finance Minister Fausto Herrera said on Thursday that 2016 will be a year of belt-tightening for local governments as well as for the national government.

Ecuador’s Finance Minister Fausto Herrera

“Lower oil prices will force us to reduce annual contributions to local governments by 8% to 10%,” he said. “This is a burden that we must all share.” The announcement comes on the heels of budget cuts of $1.4 billion and $800 million already announced for the 2015 budget.

Herrera said that the 2016 budget will assume that oil will remain at the current price of $40 per barrel. Income from oil makes up about 20% of Ecuador’s public income.

Infrastructure projects already underway and educational and health care funding will not the affected by the cuts, he said. “Funding is already in place for work underway and we will not lower the budgets for programs affecting important social programs,” Herrera said. “The most vulnerable citizens will be protected.”

For 2016, Herrera said, he expects budget cuts totaling $3.3 billion.

Herrera said that investments made in infrastructure and social programs in recent years will ease the pain of coming budget cuts. “This government has invested wisely in the past eight years and we have seen greater results than in any other Latin American country. These public works that we now enjoy benefit all Ecuadorians,” he said.

Herrera pointed out that Ecuador’s investment in public projects has been the highest in percentage of GNP of any country in the Western Hemisphere since 2007.