Debt jeopardizes public investment

			
				Debt jeopardizes public investment		  	
		
Actualizado 2016/05/05 10:04:32

	    Miriam Lasso
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					miriam.lasso@epasa.com
				
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The lack of projection of the economic activity of the country puts at risk the ability of the State to develop investments in public and social works, warn economists.

The lack of projection of the economic activity of the country puts at risk the ability of the State to develop investments in public and social works, warn economists.

To this situation is added a deficiency in the revenue collection and the unperceived growth of public debt.

Thus react specialists to the latest report on Medium-Term Fiscal Framework of the Public Non- Financial Sector (SPNF), recently presented by the Ministry of Economy and finance (MEF), which shows a debt in the order of $21,815 million by 2016 which would represent 40% of the gross domestic product (GDP) of the country, which, for this year, the Government estimates will grow in 6.3% i.e., $53,869 million.

For economist, Raúl Bethancourt, this increase in public debt is because the current Government´s revenue are no longer sufficient to cover the costs.

According to the document, the total expenditures of the State would be by $9,284 million this year, some $1,615 million above the $7,669 million of current incomes which is expected to be raised for this period.

According to Olmedo Estrada, President of the Association of Economists of Panama, this is the result of a deficiency in the revenue collection policies that are being enforced.

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For the specialist, the situation is more troubling since, after two years of Government, the State´s investment strategic plans are still completely unknown.

He said that while the population calls for urgent works on issues such as water and road network affecting their quality of life, the speed of the works is extremely slow.

He indicates that the Panamanian State not only has failed in planning out the needed works, but also has it failed in implementing its investment budget.

In addition to the impact that the level of indebtedness in the population can have, in Estrada´s view what is most worrying is that the State is going beyond limits.

He warns that managing a debt with respect to GDP below 35% is healthy, but when it goes beyond this percentage it denotes an increasingly indebted country and fixing this problematic scenario will require more work.

According to the economist, an increase in debt is not justified if the economy grows in a sustainable way.

However, the situation would be even more complex if one takes into account that the estimated growth of the country according to the MEF was not consonant with reality, which could make that debt to represent even more than 40% of GDP at the end of this year.

By 2015, the Government's growth projection was above 6%, however, the actual growth was 5.8%.

Bethancourt also added that the slowdown must be taken into account at the international level, since this slowdown alongside the effects of El Niño Phenomenon, one way or another, have an impact on Panama, which could reduce revenues for the State.

In the same way, economists highlight the commitments of the State for transfers and subsidies, which totaled $446 million, by the year 2015, 2.3% of the total budget, figures that would be subtracted from the revenues and with the amount intended to pay the debt less money for the needs of the population would be left available.

Notwithstanding the foregoing, Bethancourt does not consider that the country is at the level of contingency of expenditure, although he does not rule out that in the coming months, product of the behavior of the economy and the effects that international scandal of Mossak Fonseca Papers may bring, situations such as flight of capital and the decline in foreign investment can be experienced.

Both economists agree that the State must prioritize investments, forget the media show and concentrate on solving the problems that the country has.