The sustainability of external public debt in Ecuador 2000 -2023
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Abstract
In recent decades, the sustainability of public debt has become a central concern for economies, particularly in Latin America, given the potential impact it may have on economic growth and social well-being. The article analyzes the country's fiscal policy through a cointegration model over the period from 2000 to 2023, evaluating its sustainability and revealing weak fiscal policy sustainability with significant long-term structural imbalance risks. Dividing the analysis into two subperiods (2000-2011 and 2012-2023), a significant structural change is evident. In the first subperiod, the sustainability of fiscal policy was not entirely robust, but it did not stray too far from the sustainability objective. In the second sub period, the absence of a significant relationship between public sector revenues and expenditure indicates the unsustainability of public sector debt. The crisis of 2015-2016 and the COVID-19 pandemic further exacerbated this sustainability issue, highlighting the need for public funds to be directed toward compliance with government budget constraints to ensure the long-term sustainability of government resource flows. It is recommended to deeply analyze the financial accounts and evaluate the difference between the government's regular revenue and the national debt using different methods instead of sustainability models.
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