Creating Fiscal Space for Poverty Reduction in Ecuador: A by World Bank

By World Bank

Ecuador?¦s awesome monetary functionality of 2003 is encouraging, yet fragile. a number of structural bottlenecks may hamper monetary self-discipline and restoration, that is a pre-condition to boost a poverty relief schedule. Tax earmarkings and exemptions and an expansive payroll and pensions invoice have decreased to a minimal the on hand financial house for improvement wishes. Reversing poverty traits is important for the country?¦s balance, and this may simply be accomplished with well-targeted, potent and effective pro-poor courses. the established order isn't really an alternative for poverty relief. retaining a legitimate financial place and deepening confident social results is easily close by. one of the country?¦s many strengths are: a chronic oil providence; the lifestyles of and compliance with monetary ideas; lowering arrears that are meant to absolutely disappear in 2004, significant development on social results regardless of lowering budgets; and a sequence of on-going reforms on price range administration. If reforms are to be triumphant, they must be pro-poor. Ecuador?¦s economic rigidity and negative price range administration is deeply rooted in a governance process reaping benefits the elites, be it mirrored on pro-rich subsidies, particularly on simple 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 greater, effective, sustainable and equitable tips to the negative.

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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)

Example text

The first section reviews the historical background that preceded dollarization; the second section discusses the main challenges the country faces in strengthening the institutional framework for dollarization; and the third section explores the structural features of fiscal policy in Ecuador, emphasizing the political economy determinants of fiscal performance. 1 2 A WORLD BANK COUNTRY STUDY In doing this, the chapter claims that the ultimate root of Ecuador’s fiscal predicament lies in the political-economy regime that emerged in the aftermath of the oil boom of the seventies.

1 percent in 2003. Dollarization also makes commercial integration with the rest of the world easier because it eliminates the transaction costs associated with currency exchange. In particular, in the case of Ecuador, dollarization is an obvious advantage for pursuing commercial integration through a trade agreement (bilateral or otherwise) with the United States. Finally, dollarization has a well-known disciplining effect on fiscal policy in that, in the new system the Central Bank cannot monetize fiscal deficits.

2: THE ECUADORIAN POLITICAL ECONOMY (CONTINUED) ers (in the form of, say, popular protest or judicial decisions) have the potential to block the implementation of policies (Pachano and others 2004). Furthermore, political party fragmentation has brought about a crisis of representation. A number of social groups do not feel they are adequately represented by the existing political parties. As a result, social and economic demands are channeled intensively via the social organizations (Jácome 2004) instead of through the political parties, as is the case in mature democracies.

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