IDB investing heavily in Ecuador

12 Jul 19

The Inter-American Development Bank is to lend Ecuador $300m to help improve fiscal management in the Andean country, it has announced.

This loan aims to improve the quality and efficiency of public spending and transparency and how tax policy is managed as the country grapples with soaring public debt to finance growing fiscal imbalances.

In a statement marking last week’s announcment, the IDB said loan will “contribute to Ecuador’s fiscal stability, facilitating sustainable growth and maintaining the main indicators of social development.”

The loan, which has a repayment term of 20 years, will “strengthen macro-fiscal management, improve the quality and efficiency of public spending and transparency and the management of tax policy and management.”

It aims to tighten the growth of public spending and expand the role of the private sector in public investment through reforms to laws on public-private partnerships. Reforms are expected to increase the percentage of the amount of PPP projects structured and tendered for in the country by 2023.

Support will be given to strengthening state management and control over public companies through amendments to existing legislation on public enterprises, according to the IDB.

The fiscal regimes of public enterprises will be brought in line with private sector norms and, among other changes, women will gain greater participation in the executive boards of these companies – rising from 3% to 40% between 2018–2023.

Major changes to tax and customs administration are also expected, with online services set to be introduced for the delivery and receipt of tax information and payment.

The reforms are expected to improve the fiscal balance by reducing the ratio of public spending to GDP, decreasing the average time in tax compliance; and increasing VAT collection, the IDB said.

It believes that by improving the allocation of fiscal resources to spending priorities the programme will “benefit the entire population” not just the private sector.

This comes just months after Ecuador sought help from the IMF, which backed a new economic plan with $4.2 billion aiming to cut debt and increase productivity that is based on curbing public spending.

  • Gavin O'Toole, expert on Latin America
    Gavin O'Toole

    A freelance journalist. He has written six books about Latin America and taught the politics of the region at Queen Mary, University of London.

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