(Bloomberg) -- Ecuador’s 2024 budget targets a lower fiscal deficit despite pressure to boost security spending, as the government seeks to boost its chances of a deal with the International Monetary Fund. 

President Daniel Noboa is asking legislators for $35.5 billion in spending, equivalent to about 29% of gross domestic product, according to a statement published overnight. The government is targeting a deficit equivalent to about 4% of GDP, down from more than 5% last year. 

The administration also recently passed a series of tax increases, including a rise of three percentage points in value-added tax. Noboa is simultaneously trying to fund an “internal war” against the drug gangs that have overrun the country, including by building new jails, while also shoring up public finances. 

“We’re always counting on multilateral backing,” Deputy Finance Minister Daniel Falconi said during a media briefing Wednesday. The government plans to borrow $11.1 billion this year, about $4.8 billion from multilateral lenders like the Fund and World Bank and $6.3 billion in domestic debt placements.

Regarding foreign financing, he said that the government has identified loans that are available in multilaterals’ portfolios and Ecuadorian officials will attend the upcoming spring meetings of the IMF and World Bank.

Variable rates for multilateral debt hinging on the US Federal Reserve’s monetary policy decisions will also influence the budget going forward, as will the higher taxes not yet booked, he added.

Last month, the government was so short of cash that it was unable to pay salaries on time and delayed payments to government contractors. 

The possibility of a multi-year IMF program has helped Ecuador’s bonds outpeform peers in recent weeks. 

The government estimates GDP growth of 0.8% or this year, from 3% in 2023, according to the text of the document. The budget is being delivered later than usual due the disruption of out-of-cycle elections last year. Under Ecuador’s fiscal rules, the new budget will also be valid in 2025 as regular elections are scheduled for the first half of next year.

(Updates to add comment on international borrowing in fourth, fifth; 2025 budget in ninth paragraph)

©2024 Bloomberg L.P.