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Updated On: Sunday, 25 August 2019

IDB supports Ecuador's fiscal stability with $300 million

Content by: Inter-American Development Bank

The Board of the Inter-American Development Bank (IDB) approved a $300 million loan to contribute to Ecuador'sfiscal stability, facilitating sustainable growth and maintaining the main indicators of social development.

This loan will strengthen macro-fiscal management, improve the quality and efficiency of public spending and transparency and the management of tax policy and management.

The program contemplates the strengthening of the fiscal responsibility framework through a limit of growth of public expenditure of the central government; and greater transparency in public debt statistics.

It will also expand the fiscal capacity for public investment with private contributions through reforms to the Law on Incentives for Public-Private Partnerships (PPP) and the creation of the PPP Unit for subnational governments. As a result, it is expected to increase the percentage of the amount of national PPP projects structured and tendered for 2023.

Support will be given to the strengthening of State management and control over public companies through the submission to the National Assembly of amendments to the Organic Law of Public Enterprises (EEPP), including improvements to the corporate governance system thereof, the alignment of its fiscal regime to that of its peers in the private sector, improvements in the transparency requirements of the EEPPs and a greater participation of women in the executive boards of these companies, going from 3 percent to 40 percent between 2018-2023.

The program establishes improvements to the tax and customs administration with the presentation of an action plan for the integration of processes of the Internal Revenue Service and the National Customs Service in data management, control and taxation of taxpayers, and implementation of online services for the delivery and receipt of tax information, and the payment of tax obligations.

As a result of these reforms, it is expected to improve the fiscal balance by increasing the non-oil primary balance of the Non-Financial Public Sector, reducing the ratio of public spending to GDP, decreasing the average time in tax compliance; and increasing VAT collection.

The program will benefit the entire population by improving the allocation of fiscal resources to spending priorities. The private sector will have a stable macroeconomic and fiscal context, conducive to investment; and taxpayers will benefit from reductions in the cost of tax compliance.

The IDB loan, for $300 million, has a repayment term of 20 years, a six-year grace period and an interest rate based on LIBOR. This policy reform program is structured under the multi-tranche modality. The executing agency is the Ministry of Economy and Finance of Ecuador.

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The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region. 

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