QUITO – Ecuador’s government is working on a reform package that will raise the taxes on cigarettes, alcoholic beverages and soft drinks to cover the budget deficit created by the drop in the price of oil, the Andean nation’s top export product, President Rafael Correa said.
“The price of petroleum keeps dropping” and the government must make “certain adjustments,” Correa said during his weekly show on Saturday.
The president said recently that the plunge in oil prices had created a budget “hole” of about $800 million because officials had based their spending projections on an average oil price of $35 per barrel.
Petroleum, however, fell below $30 per barrel in trading this year, Correa said.
“The fiscal situation has gotten complicated” even though oil prices “have recovered” in recent weeks, the president said, adding that he hoped the upward trend would continue.
Tax reforms are needed, but the administration will not target past revenue sources, such as cooking gas, telephone service and electricity, that affect the public, Correa said.
“We’re going to raise (taxes) on cigarettes, alcoholic beverages and soft drinks ... because, in addition, they have huge harmful effects on health,” the president said.
“We’re preparing the reforms,” Correa said without providing any additional details.