Impact of the Tax on the Exit of Foreign Currency on the Dollarization of Ecuador in 2024

Abstract

Ecuador does not have its own currency and relies on the circulation of the US dollar, making any capital flight a serious threat to national liquidity. This article analyzes the impact of the Foreign Currency Outflow Tax (ISD) on Ecuador’s dollarized economy during 2024. A quantitative, descriptive, and documentary methodology was applied, using data from the Internal Revenue Service (SRI), Central Bank of Ecuador (BCE), and ECLAC. The ISD has historically been the country’s third-highest source of tax revenue, averaging USD 1.155 billion annually. Though originally conceived as a regulatory tax, over time it has become a key fiscal tool. Internal and external factors have influenced its collection, including tax reforms, tariff reductions, and global economic policies. While revenue declined in 2020 due to the pandemic, fiscal changes continued to affect its performance in subsequent years. Nevertheless, the ISD has contributed to economic stability by limiting uncontrolled capital outflows. The study concludes that although the ISD is necessary, it must be adjusted to support production and investment without burdening productive sectors.

Keywords: Foreign Currency Outflow Tax, dollarized economy, Ecuador, fiscal policy, tax revenue, trade balance.