Ecuador cuts public spending by $4 billion in face of new debt crisis

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Ecuador cuts public spending by $4 billion in face of new debt crisis

Ecuadorean President Lenin Moreno on Tuesday announced new public spending cuts aimed at saving his government $4 billion as the Andean country faces a new debt crisis worsened by the coronavirus crisis.

The collapse in global oil prices and an economic slowdown as Moreno’s government scrambles to contain one of Latin America’s worst COVID-19 outbreaks have dented state revenues by $8 billion.

Ecuador’s total public debt was $58 billion as of March, equivalent to almost 53% of gross domestic product.

Moreno, in a TV broadcast, also unveiled a new system to limit gasoline price changes. The system will allow prices to fluctuate by 5% from the oil price and will be revised each month.

Moreno’s decision last year to eliminate state subsidies for gasoline spurred weeks of violent protests in Ecuador, which prompted him to reverse course.

The spending cuts will lead to a reduction in the work day by two hours, which will cut state workers’ wages. Moreno said the government would also renegotiate its debt load, which would save an estimated $1.3 billion in interest payments.

Ecuador has registered over 33,000 coronavirus cases and around 2,800 deaths, overwhelming health and funeral services in the southern city of Guayaquil. In the country of 17 million people, the pandemic has left 150,000 people unemployed.

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