- National Assembly of Panama
The National Assembly of Panama, of opposition majority, approved today in the third and final reading the project with the amendments to the fiscal social responsibility law, which allows the Executive to accede to an additional credit of 300 million dollars for public investments.
Bill 693 reforms Law 34 of 2008 on Fiscal Social Responsibility and Law 38 of 2012, which creates the Savings Fund of Panama (FAP) and opens the doors for a financial dispensation, informed the National Assembly (AN, Parliament).
The reforms to the Fiscal Social Responsibility Law and the FAP Law received the third reading after a series of amendments to Bill 693, to establish transparency in public investment projects and the adjustment of the fiscal deficit law, to avoid its interference with the development plans of the next government.
This bill promoted by the Executive extends the fiscal deficit from 1.5 to 2 percent and gives access to 300 million dollars for investment expenses, which according to the proponents, needs greater economic injection to complete infrastructure works throughout the country.
According to the amendments applied to the bill, it is established that the budget execution has to be subject to this law in order to "ensure a prudent fiscal policy and a sustainable public debt".
The approved legislation establishes that the maximum deficit limit of the fiscal balance of the Non-Financial Public Sector (SPNF) will be 2.0 percent of gross domestic product (GDP) as of fiscal years 2018 and 2019; of 1.75 percent as of fiscal years 2020 and 2021; and 1.5 percent of GDP as of fiscal year 2022.
The bill establishes a sub-limit on the commitments to be contracted regarding investment expenses to be made under "turnkey" and deferred payment project modalities.
It determines that the absolute amount of these commitments cannot exceed an equivalent amount of 20 percent of the total investment expenditure of the NFPS and that it cannot exceed GDP growth plus inflation.
This measure excludes expenditures in the health sector provided by the Ministry of Health (Minsa) and the Social Security Fund (CSS), pensions and retirements paid by this social security entity and interest on public debt.
In the second reading, held last week, parliamentarians questioned that the Executive "has exceeded more than 900 million dollars in spending" and "that at the end of the approval of the 300 million dollar exemption, this excess could be estimated in 1.2 billion dollars," the AN said in a statement.
The deputies considered that the Executive Body "instead of submitting an amendment to the Fiscal Responsibility Law had to request a waiver to overcome the current deficit".
In the reading the government was also criticized for violating article 275 of the National Constitution regarding the fiscal deficit allowed to each administration.
The bill introduced by the Government supports the application for exemption for 300 million to be used in investments.
On September 21, the council of ministers approved the new bill that reforming the fiscal responsibility law to simplify the calculation of the deficit, two months after it was forced to withdraw a similar bill.
The government withdrew on July 19 the bill to expand the fiscal deficit and access to 300 million dollars for investment spending this year, which had raised resistance in the opposition majority in parliament.
Panama's economy grew 5.4 percent of GDP in 2017, up from 5 percent in 2016, boosted by the interoceanic canal, the airline industry and financial services.