Creating Fiscal Space for Poverty Reduction in Ecuador: A by World Bank

By World Bank

Ecuador?¦s remarkable financial functionality of 2003 is encouraging, yet fragile. a number of structural bottlenecks may perhaps bog down economic self-discipline and restoration, that's a pre-condition to boost a poverty relief time table. Tax earmarkings and exemptions and an expansive payroll and pensions invoice have lowered to a minimal the to be had financial area for improvement wishes. Reversing poverty traits is important for the country?¦s balance, and this may merely be completed with well-targeted, powerful and effective pro-poor courses. the established order isn't really an choice for poverty relief. holding a valid financial place and deepening confident social results is definitely nearby. one of the country?¦s many strengths are: a protracted oil providence; the lifestyles of and compliance with economic principles; reducing arrears that are meant to totally disappear in 2004, major growth on social results regardless of lowering budgets; and a chain of on-going reforms on finances administration. If reforms are to be successful, they must be pro-poor. Ecuador?¦s financial pressure and bad price range administration is deeply rooted in a governance approach reaping benefits the elites, be it mirrored on pro-rich subsidies, in particular on simple infrastructure; off-budget operations that hinder transparency and foster corruption, or regressive transfers to subnational governments defined through occasion politics. The problem for the govt is to supply more advantageous, effective, sustainable and equitable counsel to the negative.

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Extra resources for Creating Fiscal Space for Poverty Reduction in Ecuador: A Fiscal Management and Public Expenditure Review (World Bank Country Study)

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The status quo is not an option for poverty reduction. Preserving a sound fiscal position and deepening positive social outcomes is well within reach. Among the country’s many strengths are: a prolonged oil windfall; the existence of and compliance with fiscal rules; substantive progress on social outcomes despite decreasing budgets; and a series of on-going reforms on budget management. Last September an important test was the Government’s capacity to successfully resist short-term election-motivated pressures for amending the fiscal rule in order to misuse FEIREP resources.

Then, based on such a constraint, a shift to pro-poor allocations of expenditures would be easier to implement with an improved expenditure management process that is strategic in focus, feasible in terms of available fiscal space, and results-oriented with proper monitoring and evaluation mechanisms. Conclusion and Policy Recommendations Ecuador’s impressive fiscal performance of 2003 and 2004 is encouraging, but fragile. Several structural bottlenecks could impede fiscal discipline and recovery, which is a pre-condition to develop a poverty reduction agenda.

1 percent of GDP) in 1991–1992 to US$506 million (3 percent of GDP) in 1993–94. And the stock of registered private-sector debt (much of which was short-term in nature) jumped form US$258 million at end-1992 to US$832 million at end-1994. Because of their volatility, the flows of short-term capital introduced a major factor of vulnerability for the economy. The lack of an effective regulatory and supervisory framework deepened the vulnerability to volatile capital flows. Three Ecuador-specific shocks,6 compounded by the general slump in confidence brought about by the Mexican crisis of 1995–96, triggered a gigantic reversal in short-term capital flows in the mid-1990s.

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