Public Debt And Economic Advance

Public debt and economic advance

Introduction

From 1999 to 2019 in Ecuador there has been a great change in both internal and external debt, which has caused some economic processes necessary to combat the social, economic and cultural problems of the country. In 1999 the total debt is 85.5% of GDP, which shows a debt of USD 19635.5 million during that period. Highlighting that it is the highest point to which the total debt reached, however from 2000 to 2009 it was reduced up to 16.4% of GDP. 

Developing

On the other hand in 2010 in the period of Rafael Correa as president, he grew vertiginously when the government had abundant oil revenues, the total debt grew, on average, to 24.3% annually and its size in relation to GDP increased by more 10 percentage points. In addition, between in 2010-2013 the real value was greater than that contemplated in the budget of each year. Likewise, much of this new debt has been contracted at high rates, in an international context of low interest rates.

This as a consequence of the policies carried out by the most important central banks in the world, especially the Federal Reserve in the United States. Likewise, 2014, when the previous regime decided to re -issue bonds in the international market, despite the fact that interest rates were expensive. This instrument continued to have prominence until the first year of the government of President Lenín Moreno. In eight months of his management, USD 7,500 million were issued in bonds.

Since 2014, the country has obtained USD 14,750 million in bonds, with rates between 7.87 and 10.75%. This type of debt has the highest rates of commitments. In 2019 according to the Ministry of Finance, Ecuador’s commitments reach 45% of GDP; That is, about USD 51 214 million, that percentage means that the country’s per capita debt is USD 6 245; That is, that is the amount that each Ecuadorian who is part of the economically active population (PEA) would be to pay if the debt acquired by the State was divided.

conclusion

One of the factors that have been questioned the most about the country’s indebtedness is the rapid growth during the previous government, which led the country to exceed the limit of 40% of the GDP allowed by law.  The main objective objective is to determine the relationship between public debt and economic growth in terms of sustainability in Ecuador during the period 1999-2019, in the same way it intends to contribute to the best understanding of the problem of the debt of the public sector and to The search for instruments that can be used in Ecuador for adequate public indebtedness management.