Lasso sends ‘austerity budget’ proposal to the National Assembly with aim of reducing the deficit

Ecuador’s government predicts its budget deficit will narrow to $2.63 billion next year as it benefits from more economic growth and oil production, according to a draft spending blueprint announced by the economy ministry on Monday.

The draft was delivered to the National Assembly on Sunday amid complaints by critics that it is too austere and new money should be pumped into education, social programs and law enforcement.

President Guillermo Lasso

The country should see a narrower 2023 deficit of $2.63 billion, down from $3.78 billion projected in the initial 2022 spending plan, the ministry said, citing a draft budget that would land 7% below levels approved for this year.

President Guillermo Lasso, a conservative former banker, drafted a 2023 budget of $31.50 billion, down from the $33.90 billion approved for 2022.

The Assembly has 30 days to debate and modify the budget and send it back to the president.

The economy ministry said the plan is backed by forecast economic growth of 3.1% and crude oil prices averaging $65 per barrel, as the government hopes the country will by next year pump some 188 million barrels.

It currently produces about 493,000 barrels per day (bpd), though Lasso plans to ramp up extraction to about 750,000 bpd by the end of his term in 2025.

Financing requirements for next year’s budget are seen falling to $7.58 billion, according to the economy ministry, down from $9.53 billion approved for 2022.

“The main source of financing for next year’s budget will continue to be multilateral lending agencies, which provide credit on beneficial terms for the country,” the ministry said in a statement.

Social investments under the plan total $15.28 billion, it added, including more spending on health, education, social security payments and university allocations. Many educators and social service advocates say the numbers are inadequate.

It would also guarantee an $1.87 billion investment plan, which includes spending on infrastructure, security and other areas, plus $1.31 billion for social protection programs for vulnerable families, the ministry added.