Vice President Otto Sonnenholzner says that there are “difficult times ahead” for Ecuador’s economy and asks citizens for their understanding as the government introduces stringent new measures to meet public obligations and to reduce the national debt.
“Despite the efforts of the past two years, Ecuador’s economic problems remain unresolved and next week we will send new proposals to the National Assembly,” Sonnenholzner said in a Saturday interview on Teleamazonas.
President Lenin Moreno met Sunday with his cabinet, Sonnenholzner said, to review fiscal options and is expected to send a final proposal to the Assembly on Tuesday or Wednesday.
Hanging in the balance is Ecuador’s agreement with the International Monetary Fund (IMF) and future disbursements totaling more than $6 billion. Under terms of the agreement Ecuador agreed to cut its annual budget deficit by $2 billion and to reduce the national debt. Among its suggestions, the IMF said the government should reduce the government payroll, eliminate fuel subsidies and increase the 12 percent IVA tax, which it says is among the lowest in South America.
The IMF also said the government should revise labor laws to encourage more hiring.
“We have not achieved many of the objectives we set out to meet,” Sonnenholzner said during the interview. “We are forced to redouble our efforts and we appeal to the people of Ecuador to be prepared for the economic difficulties that lie ahead.”
Although the vice president did not discuss specifics of the government’s plan, it already faces strong opposition in the Assembly. The Creo, the Christian Social Party (PSC), Suma, and Correistas political blocks, representing a majority of the Assembly, say they will oppose any tax increases, claiming that the solution to the crisis lies in cutting expenses and selling government-owned assets.
It is unclear if there is support for reducing subsidies, including those for LP gas, gasoline and diesel fuel.
Luis Pachala, leader of the Assembly’s Creo block says that the solution lies entirely in reducing expenses. “We oppose any increase in taxes since this will affect the pocketbooks of Ecuadorians. Instead, let’s examine the expense ledger and reduce the government payroll and its budget,” he said. “We must also sell unproductive state assets, such as the media seized by the previous administration.”
Pachala said Creo also supports “substantial” changes to current labor laws. “We must remove the bureaucratic burden on businesses that make it difficult for them to hire new employees. We have an employment crisis in the country and we must develop a strategy to put more people to work.”