Panama being watched over deficit ‘juggling’

JUGGLING with accounting methodologies  by Panama administrations to adjust deficit ceilings is not going down well with outside observers and the Ministry of Economy and Finance has announced it will work to ensure that the fiscal deficits incurred by the government fall within the levels permitted by the Fiscal Social Responsibility Law.

The standard was put into force in 2009 with the aim of putting limits on state expenditures. Since its approval, however, administrations have resorted to alternate accounting methodologies to adjust the deficit ceilings to their spending needs.

These practices have not gone unnoticed by credit rating agencies or entities such as the International Monetary Fund (IMF), which have warned Panama in different reports about the loss of credibility and the effectiveness of the law.

“The repeated revisions reveal a weakness in the institutional framework, especially in the mechanisms of accountability,” said the IMF in its latest report on the economy and finances of Panama.

According to projections, between 2016 and 2020, there will be an indebtedness of $3 billion above the original limits of the law.

Economist Felipe Chapman drew attention to the consequences of raising the deficit.

“I hope that we have finally learned the lesson of the recent past of an exaggerated and unproductive debt increase, so that hopefully it will not be repeated,” he said.

He also said that since Panama does not have its own currency or central bank, it should be more prudent than other countries, reports La Prensa.