October 2, 2019 / 2:01 AM / 2 months ago

Ecuador slashes fuel subsidies to narrow fiscal deficit

FILE PHOTO: Ecuador's President Lenin Moreno Garces addresses the 74th session of the United Nations General Assembly at U.N. headquarters in New York City, New York, U.S., September 25, 2019. REUTERS/Eduardo Munoz/File Photo

QUITO (Reuters) - Ecuadorean President Lenin Moreno said on Tuesday that his government will eliminate subsidies for diesel and low-octane gasoline and create a new corporate tax as part of a package of measures to narrow the country’s fiscal deficit.

The Andean nation, struggling under a sluggish economy and a heavy debt burden, is awaiting a new disbursement from the International Monetary Fund as part of a $4.2 billion financing agreement reached in February.

“The decisions I have made are decisions that have been delayed for decades,” Moreno said of the measures, some of which require the approval of the National Assembly.

The fuel subsidies cost more than $1.3 billion a year, he said.

Companies with more than $10 million in annual revenue will pay a special tax for three years, which Moreno said will generate “more than $300 million that will be used for security, education and health.”

The measures also include a reduction of vacation days for public employees, lower compensation for some contract workers, and changes to retirement benefits.

In an attempt to improve the oil-producing nation’s competitiveness, the government will also eliminate duties on imported technology products.

Reporting by Alexandra Valencia, writing by Brian Ellsworth, editing by Richard Pullin

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