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Ecuador Government Budget Process
Ecuador had a complex and splintered budget process. Only about
65 percent of tax revenues were dedicated to financing the national
budget. The remainder were earmarked for direct and automatic
allocation to autonomous agencies, state enterprises, and local
governments on a predetermined basis. Despite tax reform efforts in
the 1980s, several funds continued outside the regular budget
process. About 5 percent of income, for example, was designated for
revenue sharing with 100 municipalities and 20 provincial
governments. This system, which did not require recipients to
justify their need for the automatically appropriated sums, reduced
the amount of economic planning and fiscal control that could be
exercised by policy makers. Not only did recipient agencies and
local governments lack the incentive to be frugal, but the central
government was left with inadequate funds to begin new programs or
establish new agencies as needed.
With the national budget, preparations for current and for
capital expenditures were each handled differently. The Ministry of
Finance and Credit established current expenditures based on actual
budgets from the previous year, allowing for increases needed to
offset inflation. The National Development Council (Consejo
Nacional de Desarrollo--Conade) formulated a budget proposal for
all capital expenditures relying on project requests from public
agencies, which was sent to the Ministry of Finance and Credit; a
national budget plan was then drafted at the ministry and forwarded
to the National Congress (Congreso Nacional--hereafter, Congress).
Authorization for both current and capital expenditures was
complete when Congress passed the budget plan, but disbursements
against authorizations were at the discretion of the Treasury. The
Constitution requires each budget to be balanced, but throughout
the 1980s deficits were the norm.
In 1987, of total government revenues, 65 percent was derived
from taxes on income and capital gains, 13.7 percent from domestic
taxes on goods and services, 17.3 percent from taxes on
international trade and transactions, 2 percent from other taxes,
and 2 percent from nontax revenues. Total revenues for that year
represented about 18.5 percent of Ecuador's gross national product
(GNP--see Glossary).
During the same year, of total government expenditures, 11.8
percent was earmarked for the military, 24.5 percent for education,
7.3 percent for health, 0.9 percent for housing and social
security, 19.8 percent for economic services, and 35.7 percent for
other purposes. Total expenditures represented 16.3 percent of GNP;
the overall budget deficit represented 2.1 percent of GNP.
Data as of 1989
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