IMF calls on Panama to increase tax revenue

THE INTERNATIONAL Monetary Fund (IMF) has fired a warning shot across the bows of the Panama ship of state saying that that the country must strengthen its fiscal framework.

In its latest report it said the government should eliminate the changes to the fiscal responsibility law that have been approved by the various governments to raise the deficit limit.
This would allow the country to better prepare for any future economic events that would require intervention, such as the current crisis facing the Social Security pension program.
The agency said the government should also consider adjustments to the tax system to generate more revenue and introduce better controls on expenditures. It said, in particular, that the government could take advantage of the drop in oil prices to raise more revenue.
Panama has struggled on the revenue side, with income not meeting projections despite continued economic growth.
It also suggested that the government conduct a thorough review of its finances. For example, it was critical of the accounting surrounding the so-called “turnkey” projects, much favored during the previous administration, which have created liabilities of some $3.1 billion, which will increase with the financing of Line 2 of the Metro.
While the government has excluded these liabilities from its budget calculations, the IMF said that this is not proper accounting.