The Ministry of Finance accelerates the preparation of the Pro Forma Budget 2019, which must be sent to the Assembly until this Thursday, November 1, 2018.
The Portfolio adjusts the key information with some entities such as the Central Bank of Ecuador, the Service of Internal Revenue (SRI) and the National Secretariat of Planning (Senplades). For now, it works in several oil price scenarios, but “they are all above USD 54 per barrel,” according to a high source from the Ministry of Finance with whom he could discuss this newspaper.
The final price will be fixed once all the information that the entities involved have to send, the source said. So far, Finance has not officially released the budgets used in the preparation of the Pro Forma.
However, in the Prosperidad Plan, presented last August, the Government estimated that oil revenues will be around USD 2,704 million in 2019; that is, some USD 520 million more than expected during this year. In the Pro Forma of 2018, the Government programmed a price of USD 41.98 per barrel; but the average real price was USD 61.12 until August, according to Central Bank data.
Fausto Ortiz, former Minister of Finance, explains that this price difference did not become more liquid during 2018, because Petroecuador had to pay debts that it had been dragging with private oil companies, caused by the carry forward mechanism.
It is a system of payment to oil suppliers in which, if the price of crude oil is low, a part of the tariff is paid to the companies and the rest is accumulated in a debt that will be canceled when the price rises again.
Ortiz adds that if this scenario is repeated in 2019, it would be positive, because it will allow the State to reduce its debt with the oil companies and receive the full revenues later. The former minister considers that USD 54 is a prudent estimate, since it is the average between the real price of the barrel in 2017 and in the current year.
Alberto Acosta Burneo, editor of Análisis Semanal, agrees and adds that a price in that range would be more conservative compared to what the Treasury will actually receive. In the futures market the barrel is at USD 68. “The value they are projecting is totally conservative,” he said.
Acosta also mentions that in the event that the price of oil is higher than budgeted in 2019, the Government will have to allocate those resources to the creation of the fiscal stabilization fund established in the Law of Productive Development.
Although the regulations of the regulations are still not issued. Estimates by entities such as the International Monetary Fund (IMF) suggest that the price of oil in 2019 will be USD 68.76. But although at the beginning of October the oil operators were preparing themselves before the possibility of the barrel reaching USD 100 until the end of the year, analysts such as Jaime Carrera, secretary of the Observatory of Fiscal Policy, point out that “the market is very volatile “And suggests that the price in Pro Forma be similar to that of this year, to have stronger fiscal accounts.
Ortiz mentions that the more realistic the price of crude oil, the Budget will have less deficit and, therefore, the indebtedness will be lower. The Treasury expects higher oil revenues also due to higher production.
Petroamazonas said that 2019 will continue with the ITT development plan. This implies that by the end of the following year the oil from the Ishpingo field will be available. In addition, in 2019, the Cuyabeno, Oso, Yuralpa, Blanca-Vinita fields will be invested.
The Treasury, according to Ortiz, must still resolve “a serious problem of lack of current income (taxes) to meet the new current expenses that will be presented in 2019.” The most important current discharge next year will be the payment of 40% of the state contribution to the IESS Pension Insurance, which cannot be canceled with debt or oil revenues. Tax collection goals for 2019 have not been advanced, but according to the Prosperity Plan, USD 216 million less in taxes than expected in 2018 are expected. (I)