Ecuador is at a Crossroads, stability far from assured

FT.COM reported Ecuador is at a crossroads. Lavish spending by a leadership not afraid to augment high oil revenues with extra debt has done much to improve living standards. Public spending has almost doubled from 24 to 44 per cent of GDP since Rafael Correa assumed the presidency in 2007. And with a 50 per cent approval rating that is the envy of his regional peers, he is likely to bid for and win a fourth term in February 2017.

Or perhaps not. The plunge in the oil price has blown a hole in the country’s finances and, facing a $7bn-$8bn financing shortfall in 2016, the government will have to either cut back on spending, renege on its borrowings — or perhaps both.

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But Mr Correa might find more wriggle room when it comes to fiscal austerity. His finance minister has suggested spending cuts and tax increases for 2016 of $4bn, a 17 per cent reduction from this year’s budget, which contained a cut of $2.2bn. READ FULL ARTICLE