2024-03-10 11:26:13
The bank of investment Morgan Stanley believes that Ecuador’s fiscal prospects have improved, but there is still a high risk of debt defaults in the next two years. In a short time, Ecuador went from being a paradise for foreign retirees to a country on the black list due to violence and instability.
This Tuesday, February 20, 2024, while it is expected that the Government of Daniel Noboa present the General State Budget (PGE) to the Assemblyinvestment banking Morgan Stanley Withdrew its “aversion” stance on Ecuadorian debt bonds.
This is because it is considered that The government has made more progress than expected although there remains a high risk of non-payment of obligations and debts in the next two years.
The new measures announced, such as VAT increasethey should facilitate Ecuador to obtain a new IMF programthe investment bank’s analysts said, adding that authorities will not want to be in default when elections are held early next year.
“That said, we do not see enough reasons to go directly to an interest position,” they added in a note in which they set out their view on Ecuador’s bonds. most of which languish at less than half their face value despite a recent rally.
«All financing needs for 2024 have not yet been finalized and the IMF may not be a done deal either«says the note.
Besides, If the country is still unable to access financing markets in 2026, “the markets will remain at high risk of needing another restructuring.”
According to a publication by the Reuters agency, Ecuador, long a haven for foreign retirees, has been plunged into a spiral of violence since the coronavirus pandemic hit its economy.
A group of armed and masked men stormed the set of a television station during a live broadcast last month, a presidential candidate was shot dead outside a rally during last year’s elections and hundreds of prisoners have died in riots in prisons.
Violence has already taken its toll on economic activity, investment and tax collection. Even the arrival of foreign visitors has fallen at the beginning of 2024.
This puts Ecuador on the black list of countries with expectations of low growth and more economic and social instability.
Despite a significant reduction, the Ecuadorian country risk, with 1,540 points, remains the fourth highest in the region; only surpassed by Venezuela, Argentina and Bolivia.
The Noboa Government still must explain whether it will comply with the offer to reduce public spending by $1,000 million and focus the fuel subsidy in the middle of a pre-election year.
By: Diario la HORA