By World Bank
Ecuador?¦s amazing financial functionality of 2003 is encouraging, yet fragile. a number of structural bottlenecks may well abate financial self-discipline and restoration, that is a pre-condition to improve a poverty aid time table. Tax earmarkings and exemptions and an expansive payroll and pensions invoice have decreased to a minimal the to be had economic house for improvement wishes. Reversing poverty developments is necessary for the country?¦s balance, and this may basically be accomplished with well-targeted, potent and effective pro-poor courses. the established order isn't an choice for poverty relief. keeping a legitimate monetary place and deepening confident social results is definitely nearby. one of the country?¦s many strengths are: a chronic oil providence; the life of and compliance with monetary principles; lowering arrears that are meant to absolutely disappear in 2004, major development on social results regardless of reducing budgets; and a sequence of on-going reforms on funds administration. If reforms are to prevail, they need to be pro-poor. Ecuador?¦s monetary pressure and bad price range administration is deeply rooted in a governance process reaping benefits the elites, be it mirrored on pro-rich subsidies, specifically on easy 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 suitable, effective, sustainable and equitable advice to the terrible.
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Extra info for Creating Fiscal Space for Poverty Reduction in Ecuador: A Fiscal Management and Public Expenditure Review (World Bank Country Study)
Poor performance of social expenditure in Ecuador is closely linked to PEM shortcomings. Recent reviews of international experience with poverty reduction strategies have concluded that in many countries, the practice of PEM is an obstacle to the achievement of poverty reduction objectives. Ecuador is no exception. Failures in the budget process and institutional bottlenecks systematically lead to underexecution of social programs. These shortcomings result in underbudgeting or in long interruptions and delays in the channeling of budgeted resources.
First, the Ecuadorian economy is exposed to the volatility of oil export revenues. Second, it is also exposed to other sources of economic external shocks, prominent among them being those associated with private capital flows. Third, various forces of nature have been another standing source of contingency for Ecuador’s economy. 1: TOTAL PUBLIC SECTOR NET WORTH (index based on 2001 US$) Source:World Bank (2004a). 11. Beckerman (2002) points out that while many countries face standing risks from natural phenomena, if one were to list the world’s economies according to the frequency and variety of their natural disasters, “Ecuador would surely rank relatively high” (p.
Second, the reform of the fiscal management agenda needs to be designed and implemented with a medium-term view and national consensus. Piecemeal, short-term reforms can only bring short-term, often not long lasting gains. For example, the creation of Contratanet allowed the surge of an informational system about public procurement that has improved its transparency, but the more difficult task to converting it into a transactional system still remains to be undertaken. The establishment of a commission to draft such bill and the commission’s decision to consult with civil society on the draft are steps in the right direction.