(Bloomberg) — Ecuador intends to cut spending by about 2% of gross domestic product as President Daniel Noboa grapples with fiscal, debt and security crises, according to his finance minister.
Juan Carlos Vega, 51, said the new administration that took office late last month plans to reduce the number of public contractors and cut inefficiencies at state-run companies to win the support of the International Monetary Fund for a new financing program.
“There are thousands of fires to put out,” he said in an interview from his office in Quito, describing the state of Ecuador’s finances inherited from the previous administration.
With year-end bonuses for civil servants due in December, Vega’s first weeks running the dollarized economy have been particularly challenging.
Readily available cash in Treasury accounts fell to just $95 million in the first week of the month, the lowest level in 18 years, forcing the ministry to raise $3 billion to pay salaries and local governments through a series of stopgap measures, he said. The emergency plan included the sale of domestic CETES bonds, early income tax payments from local retailer La Favorita CA and other major companies, as well as the delay of billions of dollars in payments to suppliers.
Noboa, 36, took office late November after a tumultuous year that included the dissolution of congress by former President Guillermo Lasso amid a political crisis, which triggered the election of a new president for the remainder of his term ending in 2025. One of the candidates in the race, anti-corruption activist Fernando Villavicencio, was assassinated days before the first-round vote in August. Polls indicate that violent crime remains as the top issue for Ecuadorians, followed by unemployment.
Read More: Millennial Leader Takes Over Broke and Crime-Wracked Ecuador
Investors, meanwhile, remain skeptical about Ecuador’s prospects under Noboa, leaving its bonds deep in distressed levels. The fiscal deficit resurged in 2023 as Lasso’s government unraveled and is expected to end near $5 billion, or roughly 5% of GDP, compared with $1.7 billion a year earlier. With only a few months for Noboa to govern before the next electoral campaign starts, there are doubts about his willingness to make unpopular decisions.
A key test will be whether he’ll roll back fuel subsidies — a move that would likely hurt his reelection chances, but also help the government to honor its debt in 2025, when a heavier repayment schedule kicks in.
IMF Backing
The government would like to sign a standby agreement with the IMF but seeks at least a seal of approval from the Washington-based institution, which would facilitate Ecuador’s access to loans from other sources, Vega said, adding that he intends to visit multilateral lenders in the coming weeks.
Until then, “we’re studying all policy alternatives” for Noboa to pick from “so that when go to visit the multilaterals in January we’ll go with a proposal,” he said.
By the end of next week, state-owned oil company Petroecuador is expected to sign a deal with auditor Moore Stephens, fulfilling a commitment made during the previous IMF deal that ended a year ago, he added.
In the near term, Vega is working with foreign banks on two facilities to provide urgent liquidity in January. One would tap cash made available by a central bank gold sale which will reduce foreign reserves held in the metal to about 33%, still well above regional averages near 10%, as well as the bank’s 2023 net profit, for a total approaching $480 million. The other would be an oil-backed loan that would provide $600 million to $800 million.
Other key points from the interview:
• Investments in two renewable energy projects are set to go ahead in the first half of 2024 and the environment ministry has cleared a backlog of about 10,000 permits that will support mining development
• The government aims to comply with voters’ decision to shut down a major oil field inside a national park, however that also implies spending cuts and a discussion of options to focus fuel subsidies on the needy
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
