Estimated price of oil was reduced to $ 50.05

Ecuadornews:

The Economic Development Commission will analyze in the coming days the scope of the reforms in the pro forma of 2019 for the plenary to decide its approval. The budget proforma of 2019 was forwarded to the National Assembly for processing with several modifications.

One ofthe main ones is the reduction of the estimated value for oil exports from $58.29 to $ 50.05 per barrel. According to the regime, this reduction is due to the behavior of the international market with a downward trend in the price of a WTI crude oil barrel.

Another modification is the optimization of fuel subsidies next year so that thee stablished income does not change and does not increase financing needs,explained the Ministry of Finance.

The reduction of personnel expenses by $ 135 million additional to the $ 70 million of the initial initiative is another change. The salary cut would be $ 205million. César Rohon, member of the Economic Development Commission, said thatthe reduction in the estimated price of a barrel of oil is “prudent”.However, he acknowledged that the imbalance that this decrease would leave should be analyzed, since “when the income goes down the fiscal deficit increases”.

Regarding the reduction of the wage bill, the legislator, of the Social Christian Party,said that it is important, but not enough. “The shrinking of the size of the State should be focused on decreasing 10% in each Ministry to lower $ 3,000million,” said Rohon.

He pointed out that this initiative does not mean more unemployment, but to find the mechanisms to lower wages. On his side, Pabel Muñoz, Assemblyman of Citizen’s Revolution, said that a review of compliance with the observations made by the Legislative will be made. He questioned that a reduction in the wage bill would translate into an increase in layoffs in the public sector.”A proposal that seeks to reduce subsidies to popular sectors, dismissals in the public sector and concessions that are old privatizations, is an eoliberal proposal and will have our rejection,” said Assemblyman Muñoz.

For the economic analyst Marcelo Varela, the proforma continues with several failures that generate concern as the low budget for education and health,despite the reallocation of resources agreed with the universities. Varela believes that the reduction in the estimate of the WTI price of Ecuadorian crude was necessary, but he does not believe that a reduction in fuel subsidies could cover the fiscal gap left by the export of oil.

He pointed out that although the import of derivatives was reduced by around $ 613million, it will also stop collecting taxes due to the effectiveness of the Productive Development Law that frees taxpayers from companies that invest in the country. “On the one hand, taxes are not charged and on the other hand, spending is reduced, as in subsidies, so there is almost no impact,”said the academic.

On the other hand, the economic expert Diego Olmedo also considers that the new proforma still has some flaws. Despite the fact that the estimated value of the oil price had to be reduced, the savings from the reduction in the purchase of imported fuels would not be enough.

The biggest expense that the Government must reduce is precisely in the wage bill,however, Olmedo said that the reduction in spending projected for next year is minimal. The Economic Development Commission will work in the coming days to review the amendments and to finalize the report so that it can be debated in the plenary of the National Assembly next week. (I)

Source: https://www.eltelegrafo.com.ec/noticias/economia/4/reduccion-precio-estimado-petroleo