News
Thursday 8th August 2024.
August 7, 2024
The $1.387 billion spending containment plan will mark the Government’s path to address, in the first instance, the drop in revenue.
This was stated by the Minister of Economy and Finance, Felipe Chapman , when explaining that they are seeking to be transparent in the management of public finances and to apply austerity measures, due to the fall in revenues and the fiscal deficit that they have had to face in the new government. “There is a commitment to a lot of fiscal discipline,” he said.
He said they have been forced to curb spending due to falling revenues, which are below budget.
“For the first half of 2024 there is a slight decrease in revenue [compared to 2023 revenue], but if you look at what is projected in the 2024 budget, there is a significant difference…” Chapman revealed at a meeting with the media.
He said that, in light of this reality, they also committed to cancelling outstanding debts of $877 million.
“We feel obliged to make these payments, and above all, with a focus on economic reactivation,” he said, noting that the disbursements will be made to large, medium, and also small companies, many of which have their operations compromised and may close if these commitments are not honored.
He admitted that it is a financial sacrifice for the State, but they hope that these payments will be working capital so that companies can continue operating and generating employment.
He clarified that those accounts that are not properly documented and supported cannot be paid. “ We hope that by the end of the year we will be able to pay off this debt to suppliers ,” he reiterated.
He said that they will provide technical support to each entity and ministry so that they can appropriately cut resources and make adjustments to their budgets to comply with the spending cut plan.
He also indicated that given the performance of public finances, with a debt of more than $51 billion and a reduction in income, this year it will be difficult to comply with the fiscal rule of 2% of GDP set as a limit in the Law of Fiscal Social Responsibility.
“ Let us speak with total transparency; what the Law of Fiscal Social Responsibility mandates, with a 2% limit, is impossible to comply with. Looking at the numbers, the behavior of the income is evident,” he revealed.
Chapman said they cannot cut spending further because they are tied to special laws that set a series of increases for public employees, which he described as a straitjacket to adjust the national State budget.
“Doing these calculations of income and the limitations to reduce expenses, it is evident that it is impossible to meet the 2% target. We are working on it, but the figure will be higher than 2% ,” he said, indicating that they will have to raise the limit imposed by law.
He said that they hope to modify the architecture of the Law on Fiscal Social Responsibility because it is very rigid and ineffective. “It does not include the concept of a structural deficit or when the economic cycle changes.”
The minister also stressed that the economic growth outlook for this year remains at 2.5%, while for 2025 there is a consensus that the economy will accelerate, motivated by a higher pace of private and public investment.
He said they hope to work to recover the Republic’s investment grade from the Fitch rating agency in the short term.
Regarding the drop in revenue, Chapman said that they are conducting analyses to find the reasons for the drop in revenue. Moody’s has indicated that the revenue estimates have not been realistic and Chapman said that they are trying to validate that hypothesis.
On the subject of activating travel expenses, he said that since these resources have been eliminated, officials will not be able to travel to meetings with the International Monetary Fund, nor with rating agencies, investors and bondholders. “ This makes the good management of the Republic difficult .”
He said that if the per diem expenses are authorized again, a very careful management of these resources will be applied. “This comes with a very careful management; so that there is no abuse, so that it is money well invested by taxpayers,” he said.
The minister also clarified that the financing strategy for up to $6 billion is not intended to increase the debt.
“It is an authorization for when we need to access the markets to honor our obligations and pay our debts. Every year the Government has to pay for the debts due and it has to pay in order to have a good credit and for Panama to be seen as a debtor that fulfills and honors its commitments,” he explained.
He said this plan allows them to have that financing in advance when it is needed through pre-authorization.
“ The debt will not increase; these are pre-authorizations .”
He said that both these spending containment measures and strategic financing planning send a positive signal to the markets.
Regarding the 2025 fiscal year budget, he said they hope it will be lower than the one set for 2024, which was $30,690.4 million.
Chapman said that they have held meetings via videoconference and video calls with the various international economic agents represented in the rating agencies.
“The reception from the rating agencies was very good, a video conference was held; we were unable to travel because we do not have travel expenses. This human contact allows us to have a better perception. But the perception we had was positive; we spoke to them frankly.”
He said that one of the goals is to improve tax collection with the current tax rules, so he ruled out raising taxes.
This year, the government will not issue debt on the international market, but will instead issue notes on the domestic stock market.
“ Panama has no intention of entering the international markets for the remainder of 2024. The Republic’s intention is to initiate a treasury note program with the actors in the local issuance market, with terms of two to 10 years,” explained the Vice Minister of Finance, Eida Sáiz, noting that this program has an authorization of up to $6 billion and these issues can be executed until 2029.
There will also be the possibility of credit lines for working capital of up to $3 billion.
Chapman also said that they do not intend to reduce payrolls and jobs abruptly, but rather aim for a moderate strategy so that people leaving the public sector can enter the economy with productive jobs in the private sector.
The National Assembly , chaired by Deputy Dana Castañeda , declared open the nomination period for the election of the positions of Comptroller General and Deputy Comptroller General of the Republic.
For four business days, those interested in filling the position must appear at the General Secretariat of the Assembly , located in the Justo Arosemena Palace, to present the documentation required for this process.
As provided for in Article 279 of the Political Constitution, those interested in this position will have to provide the following:
- Original birth certificate.
- Personal background certificate.
- Certified copy of the university degree.
The period for receiving these documents will be from Friday, August 9 to Wednesday, August 14, between 8:00 a.m. and 4:00 p.m.
The Comptroller appointed by the current Assembly will replace Gerardo Solís , who was appointed to the post on August 13, 2019. Solís’ term ends in December of this year, while the new Comptroller will assume his duties as of January 2, 2025.
According to a resolution approved on the afternoon of Monday, August 5, the Credentials Committee, chaired by Representative Shirley Castañeda , must analyze the documents of those interested in the position.
Even before the call for this process, the name of Anel Bolo Flores was mentioned in political circles, with high probability, to replace Solís in the position.
The fines imposed by the National Public Services Authority (ASEP) on Naturgy ($14 million) and ENSA ($7.3 million) should not increase or affect users’ electricity rates, but rather the opposite.
This was confirmed by Zelmar Rodríguez Crespo, administrator of ASEP, when reporting that starting with the billing for the month of July, Naturgy customers will see a credit in their favor, while in the case of ENSA it will be applied to consumption for the month of August.
“They will see it as compensation or credit on their bill. Naturgy is crediting them from July, and ENSA between August and October. It should be noted that this credit is for the poor service received,” said the official. The fine imposed on Naturgy dates back to 2011 and 2012. For Ensa, it is due to the quality of service between 2011, 2013 and 2014, said Rodríguez at the National Symposium on Energy and Water of the National Union of Industrialists.
On July 15, ASEP imposed a fine on Naturgy, specifically on the Metro-Oeste Electric Distribution Company, SA (Edemet) for $10.7 million and the Chiriquí Electric Distribution Company, SA (EDECHI) for $3.6 million, for failing to comply with current service quality standards in the area of electricity.
On July 30, ASEP fined the electricity distribution and marketing company Elektra Noreste, SA (ENSA) $7.3 million, also for deficiencies in the quality of service provision.
The ASEP administrator stressed that everyone who had a contract on the dates mentioned will receive a credit in their favor on the billing.
Several civil society figures have spoken out after Ernesto Cedeño, a member of the Movimiento Otro Camino (Movement Another Way) party, presented a legislative proposal to modify the Judicial Code in order to prohibit the civil seizure of property and assets of media outlets and of people who report acts of corruption.
The initiative has sparked a wide debate, highlighting the need to protect both journalists and whistleblowers, who play a crucial role in the fight against corruption and in defending freedom of expression in the country.
Cedeño himself told La Prensa that he has been proposing legislation on this issue for years, but he had not been heard. “We must defend freedom of expression and democracy,” said the deputy.
“Journalists and whistleblowers of corruption are being persecuted, so they must be protected. There is judicial harassment,” said Cedeño.
Organizations such as the National Journalism Council and the Forum of Journalists for Freedom of Expression and Information agreed that journalistic associations have always been open to dialogue to facilitate projects that guarantee freedom of expression and of the press.
“We have always denounced the tendency to use legal means to hinder the work of journalists and the media, because it not only undermines the ability of the media to inform, but also affects their assets and their economic capacity to operate. The project requires greater consultation with the different groups in society,” they said.
For lawyer and activist Magaly Castillo, the bill guaranteeing protection not only to the media, but also to human rights defenders and anti-corruption activists is “very important” and “appropriate.”
“The seizure of property becomes a threat to freedom of expression and a source of harassment and intimidation for those who denounce arbitrary actions,” Castillo said.
According to Castillo, a few years ago there was an attempt to work on a law to protect journalists and human rights defenders, but no progress was made, so he finds it “very positive” that this issue is being discussed