Ecuador: tax rises and state asset sales set to fund earthquake recovery

21 Apr 16

Ecuadorian president Rafael Correa has announced one-off taxes, asset sales and potential new bond issuances to pay for the recovery bill from last Saturday’s 7.8 magnitude earthquake.

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Rescue workers at the scene of a collapsed house following the earthquake in Ecuador

Rescue workers at the scene of a collapsed house following the earthquake in Ecuador

 

Correa announced the measures on Wednesday as the death toll from the worst disaster to hit the country in decades rose to nearly 600 and a strong aftershock shook the south American nation. He warned earlier this week that reconstruction costs could run into the billions of dollars.

In a televised address, Correa increased VAT from 12% to 14% for one year and said unspecified state assets will be sold to pay for homes and infrastructure to be rebuilt.

People with more than $1m in assets are also to pay a one-time sum equivalent to 0.9% of their wealth and all Ecuadorians will be asked to contribute according to a sliding scale based on salary.

Those earning more than $1,000 per month will be asked to pay the equivalent of one day’s pay, which rises to two days for those earning $2,000 and so on, up until five days pay for those earning more than $5,000 per month.

“This is how a modern society responds to this kind of disaster and the way each Ecuadorian, within his ability, contributes to the recovery of his own motherland,” Correa said, according to the BBC.

He added that the country was also looking into the possibility of issuing bonds on the international market.

The Inter-American Development Bank announced yesterday that it would be joining a number of other development institutions in extending a line of credit to Ecuador, with a $300m loan.

Alberto Moreno, IDB president, added that an emergency donation of $200,000 had already been approved to Ecuador provide food, medicine and shelter in its “hour of need”.

Hundreds have been killed, thousands are missing and many more have been left homeless across Ecuador, where infrastructure, sanitation and communications have also been destroyed.

Many have been left without safe drinking water and vulnerable to disease.

The IMF’s growth forecasts for the country’s already fragile economy, hit hard by tanking oil prices, were already near zero, while the economy shrunk last year.

Correa predicted a further 2-3 percentage points could now be knocked off, sending the economy back into recession. 

  • Emma Rumney

    Emma is a reporter at Cooking Recipes International. She also writes for in the UK.

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