The International Monetary Fund (IMF) and the Ecuadorean Government have reached an agreement which establishes the reduction of fuel subsidies, increase in tax, readjustment, and a reduction of public spending and federal employment.
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Recipe For Disaster? Ecuador Set for Reforms with IMF Deal
According to correspondance from Ecuador and the IMF, there are six key points that will be worked between both entities: to restore a "prudential fiscal policy;" to strengthen the financial system; to "promote transparency and good governance;" to promote the poor and vulnerable segments of the population; to support job creation and competitiveness; and to strengthen the institutional framework of the Central Bank from Ecuador.
At first glance, the proposals seem like improvements to the South American society, however, on further analysis, the letter outlines an increase in unemployment, a decrease in the country's economy, the strengthening of dollarization, an increase in taxes, and also indicates that only half of the public contracts will be renewed at the expiration date which will increase unemployment.
Former president of Ecuador Rafael Correa, who led the Citizen Revolution process in Ecuador for which Lenin Moreno was voted for, has raised his concern through his Twitter official account. Correa warns about the consequences on the population of this agreement with the international financial institution.
"Obviously, despite the fact that the government tried to hide it, 'the agreement' with the IMF obliges the country to remove almost all subsidies, but the rich will be exonerated from foreign exchange taxes, while the poor do not send money abroad. Poverty, inequality and 0 growth," assured Correa.
According to the IMF, Ecuador will decrease -0.5 percent during this year 2019 and the economic growth of the country will be measured from the next year, 2020. Countries like Argentina and Greece are an example of how devestatingly these IMF adjustments effected the most vulnerable population.
With the austerity policies implemented by Moreno's government, from December 2018 to February 2019, 11,820 people have been fired from the public sector in Ecuador, the country’s Labor Minister Andres Madero announced on March 13, on a meeting of the Workers Commission of the National Assembly.