Ecuador faces rising deficits, falling oil revenues, and urgent demands in health and security as Assembly reviews plan.

Budget arrives months into election year

President Daniel Noboa formally sent the 2025 General State Budget pro forma to the National Assembly on August 22nd, totaling $40.96 billion. The submission came later than usual because 2025 was a presidential election year. Until now, the state had been operating under an “extended pro forma,” a carryover of the 2024 budget.

By law, once Noboa was reelected in April and sworn in again in May, his administration had 90 days to submit the new document. The deadline expired on August 22nd, and the Ministry of Economy and Finance delivered the plan that same day. The Assembly now has 30 days to debate and either approve it or send it back with observations. If lawmakers fail to act, the budget automatically goes into effect.

Spending priorities in education, health, and security

The new pro forma represents a 12% increase over the 2024 plan, with nearly $4.9 billion in additional spending. Key allocations include:

• Education: $5.29 billion for basic and secondary schooling.
• Health: $5.13 billion for the National Health System, with an additional $63 million earmarked specifically for medicine purchases after shortages and the recent deaths of 12 infants in a Guayaquil hospital.
• Security: $4.03 billion for the Security Cabinet, nearly half a billion more than in 2024, including new prisons and police equipment.
• Social welfare: $1.71 billion for cash transfer programs, and $3.37 billion for social security entities IESS, ISSFA, and ISSPOL.

In addition, $2.5 billion is programmed for investment projects in energy, housing, roads, education, and Amazon development.

Revenue expectations and the oil slump

The government projects revenues of $27.44 billion in 2025, mostly from taxes, fees, and oil sales, up from $25.59 billion in 2024. However, the estimates rest on fragile foundations.

Oil, traditionally Ecuador’s main source of export income, has underperformed. Production between January and July fell 12% compared to the previous year, hurt by repeated disruptions in the state pipeline system and a fire at the Esmeraldas refinery. At the same time, international crude prices dropped by 14% in the first half of 2025.

The budget assumes an oil price of $62.20 per barrel and total production of 169.9 million barrels. Economists warn those figures may be overly optimistic.

Fiscal deficit widens amid election-year spending

As of July, state expenditures exceeded revenues by $1.55 billion. The Finance Ministry projects the year-end fiscal deficit will reach $5.6 billion, equal to 4.4% of GDP.

Much of the imbalance stems from heavy pre-election spending in early 2025. Between January and March, the Noboa government rolled out 14 new benefits, including scholarships, bonuses, and cash payments. Among them were the Ecuadorians in Action program, which paid $400 over two months to citizens over 30, and a $507 bonus to police and military personnel.

But these measures deepened arrears. By midyear, the government owed $1.65 billion in unpaid bills to suppliers, social security, and local governments.

Cost-cutting and revenue-raising measures

To confront the imbalance, Noboa’s administration has announced both spending cuts and new revenue streams.

On the revenue side, changes already in effect include:

• Elimination of the diesel subsidy for tuna fleets, saving $42 million annually.
• New mining inspection fee, raising over $200 million a year.
• Higher electricity tariffs for large companies, generating an estimated $78 million for the state and $178 million for utilities.
• Revised gasoline pricing formula, expected to save $404 million per year.

Together, these measures could bring in nearly $900 million.

On the spending side, the government announced in July a plan to merge ministries and cut 5,000 public-sector jobs. However, it has yet to disclose how much this will reduce payroll and operational costs.

Assembly dynamics and political outlook

Unlike in 2024, when the Assembly returned a budget proposal with objections, Noboa now enjoys a legislative majority, which increases the chances of approval without major changes.

Still, economists caution that the budget faces the same pitfalls as those of past administrations: overestimating revenues, underestimating spending, and resorting to last-minute tax reforms when numbers fail to add up.

“The goal should be to reduce the deficit without hiding arrears or cutting essential services,” economist Juan Carlos Salvador noted, pointing out that Ecuador has a history of including “paper revenues” from asset sales or contracts that never materialize.

For Noboa, the debate over the 2025 budget will be a test of his ability to balance campaign promises with the harsh realities of a shrinking oil sector and rising public demands in health, security, and welfare.