Lowering the debt to the legal limit will take between 7 and 10 years

Ecuadornews:

To reduce the debt, we must go a long way. Analysts estimate that lowering the debt to levels below 40% of the Gross Domestic Product (GDP), as legally permitted, will take between seven and ten years.

Until May of this year, the public debt totals 48,372 million, according to the Ministry of Finance and exceeded the legal limit at the end of 2016 according to the Comptroller’s report.

Although the government exceeded the legal limit of indebtedness, it may acquire new debt in the next three years while public spending is gradually reduced. This is established in the Law on Productive Development, approved last week by the National Assembly.

The goal is to reach 2021 at zero primary deficit. The primary deficit is the difference between income and expenses, without taking into account the payment of interest on the public debt.

Former Finance Minister Fausto Ortiz argues that getting the debt back to 40% of GDP will take at least seven years. This taking into account if the fiscal deficit falls an annual point (taking into account payment of interest on the debt) and if the economy grows at a rate of 2% per year. For this reason, Ortiz believes that he will demand more than zero primary deficit.

The editor of Weekly Analysis, Alberto Acosta Burneo, said that he has “serious doubts” about the macro-fiscal rules. Although goals are set for the next three years, annual goals are lacking to meet the objective.

“It is leaving very free, at the will of the Government what is done in these three years and is leaving an excessively large weight by 2021,” says Acosta Burneo.

For the economic analyst José Orellana, lowering the debt to 40% could take even 10 years and also have doubts about the goals set.

While the former Minister of Finance, Mauricio Pozo, believes that although good progress has been made with the announced measures, clearer goals and new tools should be proposed to help achieve the objectives.

The economic analysts will meet with representatives of the International Monetary Fund (IMF) that visit the country to talk about the current economic situation of the country.

Economists such as Ortiz, Acosta Burneo and Walter Spurrier will meet today with representatives of the IMF to discuss the fiscal situation. While Mauricio Pozo will do it next Monday.

An IMF mission, headed by Anna Ivanova, has been visiting the country since last week for the consultation of Article IV, an annual report that the multilateral organization makes about the economic situation of its associated countries. (I)

Source: http://www.expreso.ec/economia/economia-fmi-finanzas-pib-contraloria-inversion-NY2247249