Ecuador will cover its deficit with more debt
Public funding for 2016 will be $ 6,600 million ($ 5,858 million through fresh loans and $ 725 million by advance oil sales). Thus, credit will be the second source of revenue for state coffers after taxes ($ 15,400 million), but above crude sales.
But that debt will be used to in part to repay debt. So the net borrowing will actually grow, at least the overall budget deficit, in about 2,500 million.
The problem for analysts and the ruling party is that it would be costly debt. In June 2014, the country issued bonds of sovereign debt by $ 2,000 million in international markets, with an annual interest rate of 7.95% with a 10-year term. This is above the offer of Cyprus, a nation with serious economic trouble, when “issuing bonds by 100 million euros to six years in April 2014 paying a 6.5%,” says Doctor of Economics Manuel Gonzalez in his blog (economiaenjeep.blogspot.com/).