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Monday, September 01 2014 @ 09:49 PM EDT

Panama's Government Will Make Some Budget Cuts To Meet 2012 Legal Spending Caps

Money Matters
Frank De Lima - Panama's Minister of Economy and Finance
Frank De Lima - Panama's Minister of Economy and Finance
The government plans to cut about $60 million dollars out of operating costs, to reduce internal per diem payments and to cut travel as some of the measures to cover the expenses for 2012, according to the Minister of Economy and Finance Frank De Lima. The official said they have identified about $75 million dollars in investment budget items (projects which have been planned but not yet executed) which will be removed from the 2012 budget, and they are also studying projects which are already underway to determine how much can be made in adjustments to those projects to find some additional savings. De Lima said the major projects of this administration such as the construction of the new Metro subway system, the implementation of the Metro Bus system to replace the old "Red Devil" buses, the construction of the Cold Chain, and other major projects cannot be stopped. "We are working to find some budget cuts, and we're also looking for some additional income," he said on the channel 2 TVN morning news. He said the Fiscal Responsibility Act allows the government to have a deficit of 2.9% and in the first half of 2012 they had a deficit of 1.4%. "This government has complied with the tax law from 2009-2011 and this year is no exception," he added. Moreover, the official said the electricity subsidy will gradually be decreased to 300 kilowatt / hour because the government has already frozen electricity rates and they should not increase. "All consumers of electricity are subsidized because the government froze the rate," he added. (Panama America)

Editor's Comment: Frank De Lima and the administration of Panama are being responsible at a fundamental level. De Lima came right out and said during this interview "it was a mistake" to have included $400 million dollars in expected income from the sale of state owned shares in the electrical and telecommunications companies in this years budget. Now that those shares will not be sold, halfway through the year they need to go back and "find" a way to make up that $400 million dollar shortfall. But look at it this way - the annual budget for the government of Panama was about $15 billion dollars in 2012. So, a shortfall of $400 million represents about 2.6% of the overall budget. Large enough to be a problem that has to be addressed, but at the same time it's not a total game changer. So in response the government will be cutting some spending on one hand, and finding some additional revenue (taxes) on the other hand. In the meantime, all of the rest of the major work being done by the government continues to purr along smoothly. Anyone who falls into the wild-eyed screaming and ranting and raving of the political opposition is making a mistake. Martinelli got kicked in the nuts - sure. But now they are pulling back and acting like responsible adults, which is encouraging.

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