The Government must get 7,000 million more in debt
The $ 1,000 million obtained last Monday, through the issuance of bonds, represent 12.5% of the total financing needed by the Government to cover all its expenses this year, according to data from the Ministry of Economy and Finance (MEF).
According to proforma 2019, the treasury requires 8,116 million dollars in debt to meet its expenses and projects this year.
Entities and analysts calculate a higher amount. Credit rating agency Fitch points out that 9,000 million are needed and national analysts say it could be up to 10,000 million.
Until December of last year, only 56% of what is required in debt had an identified lender. But yesterday, at a press conference held at the Palace of Carondelet, the Minister of Economy and Finance, Richard Martinez, said that 90% of the needs already have a borrower in process and that they do not include International Monetary Fund (IMF).
However, Martínez did not rule out the possibility of an agreement with said organization. He added that strong shock measures can have a very large recessive effect and that the government has the objective of sustaining dollarization.
Regarding the last bond issue, Martinez assured that these resources will be directed for public investment and not for current spending, as determined by law.
The minister defended the new debt, with an interest of 10.75% and 10 years, and argued that “the country cannot stop spending on education, health, infrastructure and social programs.”
“Our function is to make the economy walk, inject liquidity and hold reserves at a high level,” said the head of Economy and Finance. “There is no financing more expensive than the one that does not exist,” Martinez emphasized.
Investors have expressed their concern about how the rest of the money needed for this year will be obtained. In recent days, the Deputy Minister of Finance, Santiago Caviedes, said that work is currently underway on four fronts: multilateral organizations, China, a securitization of oil sales and bond issuance.
According to the 2019 budget, Ecuador expects to obtain 1,750 million through the issuance of sovereign bonds. That is to say, it would be left to get 750 million more in the international markets.
For the market, it is difficult for the Government to depend on the issuance of bonds to obtain liquidity. Martinez himself said they waited “a window” to issue the papers. In past months the operation would not have been possible.
After the last placement of bonds, Ecuador’s country risk increased. The 670 points from Friday of the previous week went to 697 at the end of Monday.
Chinese debt for projects
Martinez assured yesterday that not all the resources that were obtained in the last operation of credit with China are of free availability. That is, not all of that money can be used freely.
At the end of last year, Ecuador subscribed a loan with the Asian giant for 900 million dollars. The authorities indicated that the operation does not commit more oil.
The Minister of Economy and Finance explained that only 75% of these resources (675 million) is freely available. The rest will be tied to the construction of investment projects that will be in charge of Chinese companies.
Martinez said that the problems that were experienced in the past with Chinese buildings fall on two variables: the quality standards that are required of companies and the inspection processes.
Now international standards will be applied to monitor the execution of the works that are made with these credits, said the official, such as World Bank regulations, European regulations, among others.
According to proforma 2019, Ecuador’s internal debt reaches a total of 762 million dollars. That is, 9.34% of everything that is needed for this year.
According to proforma 2019, it is planned to obtain 2,943 million dollars from the private financial sector, that is, banks. This route seeks to be the one that provides the most resources during this year.
While through multilateral organizations, the Government plans to achieve 916 million dollars. That amount does not include the International Monetary Fund. The government does not rule out an agreement. (I)