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Friday, August 29 2014 @ 10:17 AM EDT

MEF Might Have To Make Up For Potential $400 Million Dollar Budget Shortfall

Money MattersThe Minister of Economy and Finance, Frank De Lima said this Wednesday, June 20, that if they cannot achieve the support of the National Coalition for Development for the sale of the state owned shares in joint ventures and the land of the Colon Free Zone, the Government will have to make necessary budgetary adjustments. In the 2012 National Budget they had planned on income of $400 million dollars from the sale of assets. The minister added he will have to make budget adjustments necessary to comply with the Law of Social Responsibility. He said the cuts would be in investments, operating costs, and new projects that would have to be included in the next budget for 2013. "In the 2013 budget we are going to see real revenue because these revenues in 2012 were based on assumptions, the assumptions of the sales of shares and land of the Colon Free Zone," he said. On the sale of land on the Pacific (Farfan, Veracruz and Amador) approved by the Cabinet Council yesterday, De Lima denied any link with fundraising and he said this process has no relation to the loss of funds because the sales of shares might not materialize. He said in the past other previous administrations have sold land, for example, in the reverted areas and with the certification process being conducted by the National Land Authority the government currently receives funds. "So this is another source of income for the government," he said. (Prensa)

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.

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