Ecuador: Non-Financial Public Sector deficit is widening

Posted on June 10, 2014 • Filed under: Ecuador reported…Squeezed between limited borrowing options and ambitious spending plans, Mr Correa has grudgingly worked to restore investor confidence lost as a result of the default in 2008. Ecuador has kept current with payments on a different $650m bond that matures next year. Congress has passed legislation to meet international anti-laundering standards; the finance ministry has welcomed back the ratings agencies and mended ties with the World Bank. Two weeks ago, and 60 months later than originally scheduled, Ecuador permitted an International Monetary Fund review of the state of the economy and government finances, without which a bond sale would be unthinkable.
Caveats remain. The state of the public finances warrants scrutiny. The non-financial public-sector deficit is widening. In April Mr Correa said Ecuador needed to obtain $9.5 billion, or close to 10% of GDP, in credit this year, compared with the $7.6 billion approved by Congress only a few months earlier. A recent $400m loan from Goldman Sachs that was secured by more than half of Ecuador’s gold reserves raised eyebrows. Such issues will doubtless crop up during the roadshow. But it seems likely that the markets will follow Mr Correa’s lead and swallow their objections to resuming a relationship. Read Article


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