2024-07-19 14:54:24
Jaime Carrera, director of the Fiscal Policy Observatory, expressed the urgent need to reform the structure of public spending and subsidies in Ecuador to ensure long-term fiscal stability.
Since last Friday, the prices of extra and ecopaís gasoline have increased by 5% per month until reaching international prices. This adjustment is part of a series of measures by the Ecuadorian government to reduce the fiscal deficit, which last year reached 6.3 billion dollars. Carrera pointed out that, despite several measures such as increasing VAT to 15%, income tax withholdings, and reducing subsidies, this year’s deficit will continue to be considerable, estimated at more than 4.2 billion dollars.
He explained that the current structure of public spending is dominated by high costs in salaries, state operating expenses, social security subsidies, interest on public debt, and bonuses for the poorest sectors. This situation leaves little room for investment and worsens the fiscal deficit. “The reduction of the fuel subsidy will contribute only marginally to the reduction of the public deficit.”
The economist criticised the substitution of some subsidies for others, indicating that although the situation of the most vulnerable sectors is temporarily alleviated with bonds, this does not solve the structural problem of the fiscal deficit. He also stressed that in order to finance this deficit, public debt repayments, accounts payable to suppliers and municipalities, and other financial obligations must also be covered.
He also stressed that the real discussion in Ecuador should focus on how to maintain solid and balanced public accounts in the medium and long term, since without fiscal stability, economic growth, and investment attraction, the country cannot progress. According to him, a harmonious relationship between balanced public accounts, economic growth, and an abundant flow of investments is essential for the country’s development.
He stressed that Ecuadorian society, including its elites and social sectors, must understand the importance of properly managing public accounts and the economy. “Ecuador needs a great collective effort to preserve dollarization and ensure sustained growth,” Carrera said. For him, the culture of development, progress, and sacrifice must replace the senselessness and lack of rationality in the management of the economy.
Carrera also addressed the lack of transparency in the management of public accounts and criticized that, despite additional revenues from taxes and other measures, these funds have only contributed to reducing the deficit without a clear and efficient use. He stressed that transparency and a clear understanding of how public accounts are managed are crucial for society to understand the efforts needed to improve the country.