The operations will be carried out with multilaterals such as the IDB, CAF, and the World Bank. Part of the money will finance the Quito Metro. The Government analyzes which sources of financing to use in view of the fact that the scenario in international markets is not favorable. Starting Monday, the price of gas will be $ 2.98 per gallon.
The government will contract new debt for more than $ 1,000 million. Half will come through investment banking and the rest through multilateral organizations such as the World Bank (WB), the Inter-American Development Bank (IDB) and the Development Bank of Latin America-CAF.
The Debt Committee will meet during these days to approve several transactions. Part of the money will be used to build the Quito Metro. “It is time to borrow,” said Richard Martinez, Minister of Economy and Finance, who added that to heal the current situation is not enough to reduce public spending but also get financing with better conditions and costs to help cover the fiscal deficit.
Finance prepares a strategy to guarantee the payment of future obligations, taking into account that amortizations have to be honored in 2020 for $ 1,500 million and in 2022 for $ 2,000 million. The announced resources will come at times of low liquidity.
As of August 17, the Single Account of the National Treasury accumulated $ 652.4 million, according to the Central Bank of Ecuador. An important part of the funds obtained will be destined to continue covering the current expenditure, since the adjustment of the State will take time.
This was analyzed by David Castellanos, from the consultancy Multienlace, who explained that “the government cannot stop attending to its current commitments” until the current conditions change. He believes that an additional $ 2,000 million is needed to close 2018.
For this year, the government budgeted public financing at $ 8,253 million. But currently the needs reach more than $ 11.7 billion, according to Reuters. The outlook in international markets is not the best currently.
Last week the US Corporation Fitch Ratings downgraded the risk rating for Ecuador from “B” with a negative outlook to “B-” with a stable outlook. The firm explained that the rating evidences the greater restrictions of financing, as well as a lower economic growth.
Richard Francis, Sovereign Debt Director of Latin America for rating agency Fitch, in an interview published in Expreso newspaper said that markets are asking for very expensive interests for countries like Ecuador.
Resorting to the International Monetary Fund (IMF) and the World Bank (WB) is an option, but it may be difficult on the political side. For Diego Borja, ex-manager of the Central Bank, there are alternatives for internal financing that have not been contemplated and could be favorable without having to resort to multilaterals.
One of these mechanisms could be the securitization of the flow of the payrolls of the electricity companies or the portfolio of the public bank. But if the option is the IMF, Ecuador should not submit its economic policy to the conditions of those agencies, noted Borja.
Decree authorizes a hike in the price of super gas
Since Monday, August 27, the rate of $ 2.98 per gallon will apply for super gasoline, according to Executive Decree 490 signed by President Moreno.
The commercialization of 90 octane fuel will be until the inventory is finished. The increase of 2 octane will be in charge of Petroecuador and the Hydrocarbons Control Agency. (I)