MEF Might Have To Make Up For Potential $400 Million Dollar Budget Shortfall
Wednesday, June 20 2012 @ 05:04 PM EDT
Contributed by: Don Winner
Editor's Comment: This year the government of Panama is spending a total of about $14.4 billion dollars on everything from day to day operating costs, "investment" to build new projects and infrastructure, and purchasing things like radar sets from Italy. For next year the annual budget is projected to be more than $15 billion dollars, and every year they have more and more money to spend, mostly because the overall size of the economy increases and the collection of revenue (taxes) continues to become more effective and efficient. There is a Law of Social Responsibility which dictates the rules - real simple things they do in Panama which are not done in the United States. Like, they have to pass a budget for example. And, there's a cap on deficit spending. In Panama the total debt continues to increase, but the Debt to GDP ratio continues to shrink (which is a good thing) because the economy is expanding faster than the rate of new borrowing. Panama's debt/GDP ratio peaked in 1990 at 112% at the very end of 21 years of military dictatorship. The economy was a basket case and new borrowing spiked to rebuild after the Just Cause US military invasion. Since then Panama as a nation as been more and more responsible when it comes to external debt. The economy really started to take off in 2004 shortly after the election of the PRD's Martin Torrijos, and on his watch the debt/GDP ratio dropped from 70% down to 45%. Since taking over in 2009 Ricardo Martinelli has continued the positive trend and now the debt/GDP ratio is down to 41% and falling. But most importantly here - don't forget the main message De Lima put out today. If they don't get the $400 million they had projected in the budget from the sale of land and state owned shares in the electrical and telecommunications companies, then they will put on the brakes, cut spending, and make up the difference elsewhere with the new income. But they are not going to be further increasing the debt. They are managing the economy is a responsible manner, despite the shrill complaints from their politically motivated detractors.