Panama announces spending cuts to tackle galloping fiscal deficit

Panama's fiscal deficit in 2020 rose to 10.1 %, from 3.1 % in 2019, while public debt rose to 69.8 % of gross domestic product (GDP) from 46.4 %, according to Moody's data released last March, when it downgraded it to Baa2 with stable outlook sovereign rating.

RIO DE JANEIRO, BRAZIL – The Government of Panama announced Wednesday that it would cut expenses in areas such as travel expenses, consultancies, and the appointment of new positions to curb the fiscal deficit, which has soared in the midst of the ongoing pandemic emergency.

“There are some expenses that, yes, we have identified, that it is important to put up with”, declared the Panamanian president, Laurentino Cortizo, and specified that these are “travel expenses abroad, some types of consultancies and some appointments” or new public positions.

 Panama announces spending cuts to tackle galloping fiscal deficit
Panama announces spending cuts to tackle the galloping fiscal deficit. (Photo internet reproduction)

Panama’s fiscal deficit in 2020 rose to 10.1 %, from 3.1 % in 2019, while public debt rose to 69.8 % of gross domestic product (GDP) from 46.4 %, according to Moody’s data released last March, when it downgraded it to Baa2 with stable outlook sovereign rating.

In the first quarter of 2021, the deficit reached 992.1 million dollars, 18.9% more than in the same period of 2020, according to data from the Ministry of Economy and Finance (MEF).

Cortizo’s government has been criticized by local analysts and economists because, despite the economic crisis derived from the pandemic which broke out more than a year ago and which in 2020 caused the GDP to fall by 17.9%, neither expenses nor salaries in the public sector have been reduced.

Economist Adolfo Quintero said that the Government must contain spending “in the line of salaries and income of civil servants, which have not been touched” in the midst of the crisis derived from the pandemic.

It is also necessary to curb the appointment of officials who are not medical, security, or educational personnel and who, in short, represent “expenses for political responses”, added the expert.

The private sector claims that it has borne the burden of the economic crisis, which has cost hundreds of thousands of jobs to micro, small and medium enterprises (MSMEs), and has expressed its concern about the growth of public debt, used for state operating expenses and not for investment.

Cortizo said Wednesday in statements to journalists that “always in situations like this” of economic crisis “obviously, adjustments have to be made as required”, and assured that his government has an analysis-ready to approve the reduction of expenses certain areas.

“Some important adjustments are going to be approved today and, at the same time, to continue promoting and facilitating good investments”, which generate employment in the country, added the President.

 

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