Why did the Ecuador fiscal deficit 2025 remain large despite higher VAT?

VAT at 15 percent raised revenue, and diesel subsidy cuts reduced spending, but these gains did not outweigh structural outlays and lower cyclical income. One-off fixes helped cash flow, yet mandatory commitments and debt service kept the overall gap wide.

What does $8.35B debt service in 2026 mean for investors?

It limits fiscal space and raises refinancing risk. Investors should watch the mix of multilateral funding versus market issuance, the primary balance trajectory, and any liability management to smooth maturities. Stronger monthly cash data could support tighter spreads.

Could Ecuador return to the bond market in 2026?

Yes, if fiscal signals improve. A transparent plan, credible use-of-proceeds, and supportive multilateral backing can enable a selective issue. Weak data or rising social stress would likely push the Treasury toward official financing and delay a market return.

Which indicators should German investors track next?

Focus on monthly VAT receipts, subsidy policy updates, cash balances, and announcements on multilateral disbursements. Also watch the primary balance and any prospectus details if issuance resumes. These indicators shape spread behavior and liquidity conditions for Ecuador risk.

Law and Government

Ecuador Deficit 2025 Hits $5.3B; 2026 Debt Bill Rises – January 07

ByDanny Kontos January 7, 2026

Ecuador fiscal deficit 2025 reached $5.312 billion despite higher receipts from Ecuador VAT 15% and diesel subsidy cuts. For 2026, the budget sets $8.35 billion for debt service, which narrows fiscal space and may force more multilateral support or a cautious return to the Ecuador bond market. German investors should track policy signals and funding costs, given EM allocations in local portfolios. Ecuador uses the US dollar as legal tender, so figures are in USD. We outline the key risks and what to watch next.