Ecuador’s President Daniel Noboa aims to strengthen security spending by $214 million in 2024 to combat violence linked to drug trafficking, proposing a potential increase in value-added tax (VAT) to 15% starting in April. The need is highlighted by the designation of gangs as terrorist organisations following recent violent episodes, such as hostage-taking and a TV station siege.
As per the Economy Ministry, the planned budget for security would increase from $3.3 billion to $3.52 billion from the previous year. This budget is part of the $35.5 billion budget that needs to be approved by lawmakers. Legislators initially opposed Noboa’s permanent 13% VAT increase, which is scheduled to rise to 15% as needed. Nevertheless, Noboa overcame their opposition, and the bill was passed.
Economy Minister Juan Carlos Vega announced the introduction of the VAT increase in April and cited the need to fund security initiatives, maintain economic stability, and oversee investment as justifications. Ecuador intends to use $4.8 billion to pay off its debt and is looking for $11 billion in funding; no specific request to the IMF has been made public.
Ecuador’s fiscal strategy is centred on managing debt commitments in the face of changing economic needs, addressing security concerns, and circumstances.
