Ecuador postpones payment of debt with China and does not rule out the request for a new loan

With the debt restructuring process with Chinese banks, Ecuador would postpone the payment of USD 4.02 billion until 2022 with Eximbank, the year in which the capital will begin to be paid.

These resources were to be paid between the remainder of this year and 2021, but with the agreement they will be paid from March 2022 to 2029.

Ecuador’s debt with the Eximbank amounts to USD 2’422.8 million, which is 44% of all the commitments that the country has with China and which amount to USD 5.431 million in July.

Being over-indebted, without liquidity, the Government this year has sought extensions and modifications in the conditions of the loans.

So far, the payment of USD 4.02 billion has been delayed. That figure includes the renegotiation of debt with four actors: international bondholders, creditors who have papers from the oil company Petroamazonas and the Chinese banks CDB and Eximbank.

On August 5, the Government reported that the payment of USD 417 million to be made to the China Development Bank (CDB) between this year and June 2021 was postponed. After the negotiations, the resources will begin to be paid in monthly installments from last quarter of 2021.

According to Finance, this action is part of the confidence that the international community has placed in our country to advance a debt sustainability mechanism.

For Fausto Ortiz, a member of the government’s council of economic advisers, postponing payments in these years will help reduce financing needs for the next administration.

Ortiz recalled that the debt with China will continue to grow, because between October and December a new loan is expected to be completed that will be related to the sale of oil.

I note that China gives a couple of years to pay, but that does not mean that the debt is reduced.

He added that the next step is to make the debt sustainable, that is, it can be controlled.

In 2025, the Caja Fiscal may be under high pressure again. Between 2025 and 2026, Finance must pay USD 2.385 million to the Central Bank, as part of the process of divestment of the Bank’s papers in that Ministry.

In addition, in 2026 the principal of the restructured bonds must begin to be paid.

Until September 16, pending payments totaled around USD 3.448 million, for salaries to the public sector, suppliers, social security, Decentralized Autonomous Governments (GAD), among others.

As part of the recovery of the economy, the activation of tax collection is important, Ortiz explained that in the first 14 days of September, tax collection exceeded that collected in the same period of 2019.

This is because the Government decided to advance the collection of the 2020 Income Tax, which was to be paid in 2020, to 1.068 large taxpayers.

The measure was applied to companies that in 2019 had gross income of more than USD 5 million, and that during January and July 2020 registered a profit.

Just for this collection, the Treasury plans to obtain close to USD 300 million.

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