Ecuador Seeks to Cut Debt Costs by 2010, Patino Says

By Bill Faries

June 22 (Bloomberg) -- Ecuadorean President Rafael Correa will appoint a commission to audit the country's debt in a bid to reduce the government's obligations, Economy Minister Ricardo Patino said.

Patino said the decision will be taken ``in the coming days.'' The government plans to lower debt payments to 12 percent of its budget by 2010 from the 30 percent level that's persisted for most of this decade, he said.

``The audit commission will focus on how we can determine whether debt is illegitimate,'' Patino said. ``This will help the government define its strategy for dealing with its debt.''

Correa won election last year promising to default on illegitimate debt, a term that he hasn't defined. He said he wants to free up government funds for spending on welfare and on social programs. Ecuador needs to double spending on health care and education to 10 percent of gross domestic product by 2011, Patino said.

Deputy Minister Fausto Ortiz said the country may seek financing to pay $160 million in debt due next year to the Latin American Reserve Fund early. An Ecuadorean proposal to delay payment on the debt until 2009 was rejected by the Bogota-based fund on the basis that it would affect the fund's credit rating.

Ecuador's government continues to back the use of the U.S. dollar, Patino said, adding that a constitutional assembly due to be elected September 30 should leave decisions about the nation's currency up to ``monetary authorities.''

Correa has promised to maintain the dollar as the country's official currency during his four-year term. Ecuador adopted the dollar in 2000 a year after defaulting on $6.5 billion in debt.

Patino said he's not concerned about allegations in the country's press and among some opposition parties that two recent videos show he may have sought to influence financial markets. Portions of the videos were first broadcast by the Teleamazonas station.

``I don't have the slightest concern about these accusations,'' Patino said. ``I'm absolutely convinced that I've done my job honestly. I have a clean conscience.''

To contact the reporter on this story: Bill Faries in Quito at wfaries@bloomberg.net .