Ecuador, IMF hammer out loan package details; IMF says it is pleased with Lasso’s budget plans

President Guillermo Lasso said Tuesday that his government expects to announce final details of its agreement with the International Monetary Fund within a matter of days. “We have defined the broad outline of the plan but continue to refine the small points,” he said.

Officials from the International Monetary Fund say they are close to loan agreement with Ecuador.

An IMF delegation has been in Quito since the first of the month, working with the Ministry of Finance officials to develop an agreement that could provide the country $6 billion in funding. Lasso said he he anticipates a budget deficit of about $5 billion for the remained of 2021 and 2022.

The IMF has recommend that Ecuador raise its VAT tax from 12 to 14 percent, a move rejected by former president Lenin Moreno and Lasso. “This is not the time to raise the consumption tax but we are considering other options, including raising taxes on the wealthiest citizens,” he says.

Lasso has also proposed deep cuts to the budget, a move opposed by the majority of the National Assembly. “We must cut $2.3 billion to $2.4 billion from the 2022 budget to stay within our means,” he says. “This will be painful but it cannot be put off. We will, on the other hand, not reduce spending for the poorest and most vulnerable Ecuadorians.”

Lasso adds that his emphasis is on creating new revenue sources by revitalizing the economy. Among his announced plans are a doubling of oil production and the elimination of government rules he says discourage employment.

Critics say that Lasso budget reductions go beyond the recommendations of the IMF, which proposed cuts of $500 million to $1 billion.

A member of the IMF negotiating team said he is pleased with changes that the Lasso government is proposing. “He understands the severity of Ecuador’s financial crisis and is making changes I believe put the country on the path to recovery,” says Gustavo Winston. “Understandably, he is protecting the interests of the country but, at the same time, he is developing solutions that will benefit the country in the future.”