The people of Ecuador are rising up to refound their country as a pluri-national homeland for all. This inspiring movement, with Ecuador's indigenous peoples at its heart, is part of the revolution spreading across the Americas, laying the groundwork for a new, fairer, world. Ecuador Rising aims to bring news and analysis of events unfolding in Ecuador to english speakers.

Saturday, September 13, 2008

Ecuador says to halt debt payments if oil collapses

QUITO, Sept 6 (Reuters) - Ecuadorean President Rafael Correa on Saturday said his government would halt debt payments if a free-fall of crude prices sparks an economic crisis in the oil-production country.

"If oil prices fall we would not stop spending on irrigation (projects), education and health, but stop servicing debt," Correa said during his weekly radio show.

"In case of a crisis the variable of change for us will not be the social debt, it's not going to be our people, but the pockets of creditors."

Correa, a left-wing ex-college professor who took office last year, has repeatedly spooked investors with pledges to stop debt payments to prioritize spending on education and health for the poor.

The U.S.-trained economist has so far honored debt payments, but continues to keep bondholders jittery with pledges to annul "illegitimate" debt, or loans he says are riddled with irregularities.

A government commission auditing the debt to determine "illegitimacy" is expected to deliver its final report to Correa the week of Sept. 15, a top auditor told Reuters.

Oil prices have been on a steep downtrend since hitting a record of over $147 a barrel in mid-July, closing down nearly $2 to $106.23 a barrel on Friday.

Earlier this week the Ecuadorean government proposed a $15 billion 2009 budget plan of which $1.63 billion is allocated for debt payments, matching Wall Street expectations.

In recent years, Ecuador has gradually reduced its debt burden in the government's budget. In 2008, around 16.6 percent of the country's budget was earmarked to service debt.

The budget proposal is in large part financed by oil revenues and the government has tagged a referential oil price of $85.40 per barrel for next year. Some local economists worry the optimistic oil projections could lead to a massive government deficit if world crude prices continue to fall.

Correa, who since his presidential campaign in 2006 has vowed to put "life before debt," dismissed charges he has flip-flopped on his debt policy by timely honoring loan obligations.

"We have said we would pay debt if there are funds and because there are funds we have paid," Correa said. "If we don't have those funds ... we will stop or limit debt payments."

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