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Ecuador cuts $1.42 billion from budget due to oil price plunge

Staff writer |
The Ecuadorian government cut the nation's general budget for 2015 by $1.42 billion due to "the reduction in the price of crude oil" on the international market, the Finance Ministry announced.

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In a communique, Minister Fausto Herrera said that given the "sharp drop" in the price of petroleum on the international market, the government made the decision to cut "$839.8 million in investment spending and $580 million in current spending (salaries, goods and services)."

He said that the cut in public investment was made in projects linked to imports and that they can be deferred to subsequent years, adding that the cuts will not affect projects that generate economic growth, national consumption and employment.

Regarding the cutback in current expenses, Herrera said that the cuts made there included $200 million in direct spending and an adjustment of $480 million for optimization of spending on certain entities, according to the communique.

With the cuts, the 2015 national budget amounts to $34.897 billion
The Finance Ministry emphasized the "flexibility of the state budget to adjust to external ‘shocks'" and noted that the public planning and finance code allows the government to make adjustments amounting to 15 percent of the budget approved by the national Assembly during the budgetary execution phase without needing to get further legislative approval.

The minister said that although this year is already proving to be "difficult in the economic area," due to the "hardly favorable" international situation, Ecuador will continue to finish up strategic projects in the energy sector.

With the cuts, the 2015 national budget amounts to $34.897 billion, the ministry said, noting that the National Assembly last November approved a budget of $36.317 billion.

Herrera, who is part of the group accompanying President Rafael Correa on his state visit to China beginning on Monday, will sign financing contracts with Chinese banks and will seek new lines of credit to enable the government to maintain the country's fiscal planning in the coming years.

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