QUITO, (Reuters) – Ecuadorean President Lenin Moreno yesterday said he will seek to improve debt payment terms and slash $1.4 billion from the government’s budget in response to the crash in oil prices and the economic effects of the coronavirus.
The collapse of crude prices, due to falling demand as the new coronavirus spreads globally and a price war between major producers Saudi Arabia and Russia, has upended Moreno’s hopes of closing Ecuador’s gaping fiscal deficit and cutting debt.
“The price of oil fell more than $20 … that means that every day we lose just over $8 million in revenue,” Moreno said in a televised address. “A year we would have an accumulated loss of $ 2.9 billion in revenue.”
Given the circumstances, Moreno said he will eliminate and merge state agencies and cut spending.
He also plans to seek improved payment terms of bilateral debt to “reschedule and adapt to our new reality,” and to seek more than $2 billion in financing from international financial institutions, without giving further details.
Other proposals include a 5% tax on the value of vehicles worth more than $20,000 and increased income tax withholding for large companies.
Moreno earlier said the International Monetary Fund (IMF) continues to support his government, “regardless of the difficulties we have had.”
Indigenous protesters led almost two weeks of demonstrations in October after Moreno announced he would eliminate decades-old subsidies on diesel and gasoline following a financing deal with the IMF. Following the protests, he walked back the measure and promised to find other ways to close the fiscal deficit.
The IMF has said it continues to work with the government after completing a technical visit last month.
Ecuador is still waiting for a disbursement of about $348 million from the multilateral lender.
Moreno late on Monday named Rene Ortiz, an oil analyst and consultant, as the new energy and mines minister after the previous minister, Jose Agusto, resigned because of health problems.
The country, which produces some 540,000 barrels per day of oil, left OPEC earlier this year to free itself up to raise crude output.
