Ecuador will pay $5.123 billion in subsidies in 2022, including $1.33 billion for fuel, if President Guillermo Lasso’s budget proposal is approved by the National Assembly. The largest subsidy will go to the country’s Social Security system, which was financially strapped even before the Covid-19 pandemic.
The budget passed its first legislative hurdle Tuesday when it was accepted by the Assembly’s Legislative Administration Council which will prepare an overview report for the full Assembly.
According to the president’s office, the $33.89 billion budget will have a deficit of $3.78 billion in 2022, which the Ministry of Finance says could be less if oil prices continue to rise. Lasso has pledged to eliminate the deficit entirely by the end of his four-year term.
The budget includes tax and fee increases that Finance Minister Simón Cueva says will be paid by wealthier Ecuadorians. “The poorest sectors of the population will not be affected by new taxes,” he said. “We are sensitive to the heavy toll the pandemic has taken on many of our people and it is our intention to protect the most vulnerable.”
Cueva said new taxes will focus on citizens earning more than $5,000 a month and those who own property valued above $2 million. “The president does not like new taxes but understands the urgency of the country’s situation as we enter the post-pandemic era. There are pressing needs in our social and infrastructure systems and we must focus on funding these to bring the country out of the financial crisis.”
Cueva says the proposed budget also includes incentives for investment and the elimination of taxes on some goods. “In addition to applying additional taxes to those who can afford to pay, we are allowing new deductions for the purchase of homes and agricultural land. We are also reducing and eliminating taxes on some household and business products to stimulate consumer spending.”
The budget faces political headwinds in the full Assembly, with center-leftists pushing for more spending on social programs. In a statement, the Correista UNES bloc called concerns about the deficit “totally bogus, a matter of putting money ahead of the needs of the people.”
Cueva says the president expects to negotiate before reaching a final budget agreement with the Assembly.