Ecuador will trim $1.4 billion from its 2015 budget to compensate for the loss of oil revenue, the country’s Finance Ministry announced Monday. The reduction represents about 4% of the country’s $35 billion annual budget.
Finance Minister Fausto Herrera says that the drop in international oil prices has forced the cuts. Oil revenue is the government’s largest source of income, constituting about 10% of all revenue.
Herrera said that of the $1.4 billion in cuts, only $580 will be to salaries, goods and services, and that the impact on the country’s economy will be “minimal.” The other $840 million in cuts will affect what Herrera called “investments,” and are primarily “related to imports that can be deferred but will not affect economic growth, domestic consumption and employment.”
“This will be a difficult year amid an unfavorable international economic situation,” Herrera said in a press release. “The budget adjustments will not affect projects that we consider strategic,” he added.
In December, President Rafael Correa defined strategic projects as those involving oil exploration and extraction and construction of eight hydro-electric plants that are funded, in part, by Chinese loans. “These will create income for the country in the future,” he said. “It would be foolish to curtail this work.”
Ecuador’s budget was based on an average oil price of $79.70 per barrel for 2015. Currently, the per barrel price is below $60.
Since Correa took office in 2007, the country has engaged in an unprecedented program of infrastructure expansion and upgrades, work that the president says will see modest reductions in 2015.