Ecuador Confirms Its Attachment to the IMF After Tax Law Repeal

Ecuador's Economy Minister Pablo Arosemena informed the International Monetary Fund (IMF) that President Guillermo Lasso will totally veto the repeal of the tax reform approved by the National Assembly on Tuesday night.

RELATED:

Ecuadorians To Decide in Referendum on National Interest Issues

He referred to the repeal as an unconstitutional decision and as a "bomb," which would cause the loss of US$1 billion in tax revenue and could jeopardize the IMF agreement

Although there is a 30-day term to veto a parliamentary decision, Arosemena stressed that it was important to clarify what the Lasso administration will do "because we work as a team with the World Bank, the Inter-American Development Bank, and the Monetary Fund."

"They support us with resources at 2 percent interest. If we were to place sovereign bonds today, we would have to do it at almost 20 percent," he said, seeking to justify why the Lasso administration wants to keep "a very fluid and clear relationship" with the IMF.

"For everyone's peace of mind: We are not going to have any problem because we are going to veto it," Arosemena reiterated to make sure that "nobody misunderstands things."

On Tuesday night, 100 out of 129 Ecuadorian lawmakers repealed the tax reform that Lasso implemented in 2021, vowing that it would serve to promote "economic development and fiscal sustainability after the COVID-19 pandemic."

Through the reform, he sought to comply with the austerity program that allowed his administration to access a loan for US$6.5 billion. The IMF-induced tax reform, however, significantly reduced the expense deductions that taxpayers could take, which severely affects low- and middle-income taxpayers.