Calling the government’s economic situation “critical,” President Lenin Moreno laid out a tight budget for the second half of 2017 on Friday and said he is working on a long-range plan that will involve a wide-range of austerity measures.
“We have made great progress in the recent past, upgrading our infrastructure and improving the lives of our citizens but these changes have come with a price,” Moreno said during a news conference. “We have reached the limit of what the economy can sustain and what the government can pay for.”
The president said that government liabilities, including private and public debt and social commitments, amount to almost $58 billion, or 59% of Ecuador’s GDP. The number is in stark contrast to the figure of $27 billion used by former President Rafael Correa and drew a quick rebuke from some Alianza País National Assembly members.
“We have no choice but to take responsibility for our current condition and to act immediately to face the economic crisis,” Moreno said.
Effective immediately, Moreno said that government employment would be reduced and that major capital projects, some already approved, would be cut back or eliminated. He also said his government will press efforts to stimulate the economy, including the reduction of capital gains and inheritance taxes and streamlining regulations to encourage foreign investment.
Moreno said austerity measures will not affect the country’s most vulnerable populations. “We will maintain services to the poor and disabled who need help, including housing and economic support, but in all other areas we will be austere,” he said.
Moreno said that the drop in international oil prices and the government’s failure to adjust to the “new reality” was one of the primary reason for the economic crisis. “I don’t expect a major change in oil prices and this factor must be considered in all the government’s budgetary decisions,” he said.
For the remainder of 2017, Moreno said the government would figure the per barrel price of oil at $41.69, down from the $43 figure used at the beginning of year for budgetary estimates.