Ecuador’s risk premium began this Monday below the 1,500 point barriersomething that had not happened for more than a year, after reaching 2,141 units in December, its maximum peak since 2020.
The ‘country risk’ index, which measures the premium paid by the State to finance itself in international markets with respect to the 10-year term United States sovereign bond, It is currently at 1,497 points, something that has not happened since February 8, 2023, when it was at 1,499.
This value has decreased by 644 integers in just over two months with the economic reforms undertaken by the president of Ecuador, Daniel Noboawho took office on November 23.
When he is about to complete his first hundred days of presidential mandate, Noboa has been characterized by declare the “internal armed conflict” to organized crime to contain a wave of unprecedented violence and insecurity and for giving steps towards achieving fiscal stability, after registering a deficit of about 4.8 billion dollars last yearequivalent to around 5% of the gross domestic product (GDP).
Tax hike
The Ecuadorian president managed to push through a measure to raise the value added tax (VAT) that will allow it to go from 12% to 15% starting in April, with which he hopes to raise about 1.3 billion dollars annually.
At the same time, Noboa has announced the launch of a targeted reduction in fuel subsidies in the coming monthswhich last year involved state spending of about $3.2 billion by keeping the public’s prices of 85-octane gasoline, the most commonly used gasoline, and diesel frozen.
He has also raised the possibility of extend the deadline for closing and dismantling Block 43-ITT, one of the main oil fields in Ecuadorlocated in the Amazonian Yasuní National Park, whose cessation of exploitation was voted in a national plebiscite last year.
Monetary Fund
Before taking office, Noboa, who won the presidential elections last year at the age of 35, was also emphatic in pointing out the need to make changes in the country’s economic policy to avoid following a course that, according to his criteria, could cause The country will go into ‘default’ (debt default) in 2026 or 2027.
In a recent assessment report of the credit agreement completed in December 2022, the International Monetary Fund (IMF) suggested Ecuador deepen the reforms that were left incomplete during the program, specifically the progressive elimination of fuel subsidies and tax reform. EFE
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