Ecuador’s Economy and Finance Minister Pablo Arosemena Marriott Presented the Country’s Economic Outlook
On October 14, Pablo Arosemena Marriott met with the Georgetown community to discuss recent economic reforms and what lies ahead for Ecuador’s economy.
The government has notable achievements, including the recent restructuring of the country’s debts with the International Monetary Fund (IMF) and China’s development banks. According to Ecuador’s Economy and Finance Minister Pablo Arosemena Marriott, these developments are solid indicators of the country’s economic recovery and the success of the latest reforms. The government has also successfully reduced total public debt and lowered the fiscal deficit, while non-oil derived exports such as shrimp have increased, further diversifying the country’s export matrix. The economic outlook is positive despite challenges such as rising insecurity amid widespread social protests and the effects of increasing global instability.
“The policy right now is fiscal responsibility with a clear social awareness approach.”
A Change in Trajectory
Throughout the conversation Arosemena framed his remarks by contrasting the path taken by the Lasso administration from that of previous governments in Ecuador. According to the minister, the high fiscal deficit of previous years led to the expansion of public debt from around $10 billion in 2009 to under $50 billion in recent years, a “fiscally irresponsible” path that the current administration is seeking to remedy. Another structural challenge that Ecuador faced was pre-existing oil-backed loan contracts and long-term sales contracts with financial institutions and firms from China. For years this reduced the returns from Ecuador’s oil exports. However, following this year’s successful renegotiation the country has now gained the ability to free some oil exports to be sold at market prices, providing significant relief to public finances.
Arosemena also mentioned the reduction of the government’s official advertising budget, which according to him is now one tenth of the budget from previous years. Similarly, a key area of interest is the reform of the country’s subsidies structure, which will pursue a more “targeted approach” that will seek to effectively help those individuals and sectors in need while conserving fiscal resources.
Ecuador’s Future
Moving forward, the main focus of the government’s economic team will be to conclude the current program with the IMF while continuing to improve financial governance and strengthening private sector-driven growth. Inflation in Ecuador has remained significantly low compared to other regional players at around 4%, and in extreme poverty reduction Ecuador ranks third highest in the region this year. The Lasso administration is also concluding negotiations between the government and indigenous groups that have for months led widespread protests throughout the country. The negotiations will impact the targeted subsidies strategy.
“The country is now at a crossroads, we must win the hearts of the people to get them to support democracy because our democracy is still under construction.”
Arosemena visited Georgetown University as part of his trip to Washington for the annual meetings of the IMF and the World Bank and was accompanied by the General Manager of Ecuador’s Central Bank, Guillermo Avellán Solines. Together they presented their thoughts on the successful dollarization of Ecuador’s economy since the dollar was adopted in 2000, arguing that it is perhaps the most popular economic decision made in recent history. Future challenges may arise for the country’s exports amid the current appreciation of the dollar, but so far they have seen no indicators of this while exports have grown consistently.