finance

Panama’s fiscal surplus increases

The surplus recorded for 2007 is higher than that for 2006 and equal to 3 percent of GDP.

David Mesa/LA PRENSA

Progress: Economic growth and tax reforms boosted the surplus. 990686

Panama's public finance numbers look good. In 2007, the country recorded a fiscal surplus of $683 million, the equivalent of 3.5 percent of its gross domestic product (GDP), which is a historical record, reported the minister of Economía y Finanzas, Hector Alexander. The surplus is much higher than that recorded in 2006 (0.5%) and represents a marked improvement over the red ink of 2005 and 2004, when the country ran fiscal deficits of -3.2 percent and -4.9 percent , respectively.

"It's surprising good news. A surplus of $200 million was expected, but this. . . The Government should use this to reduce the balance of public debt," said the president of the Cámara de Comercio, Domingo Latorraca. The change corresponds mainly to the boom in Panama's economy, which grew by 11.2% last year, and a rise in tax revenues that was driven by tax reform. But these figures for the non-financial public sector are not the only good news. The central government also recorded a surplus last year of 1.2 percent of GDP. Government savings, a key figure for measing the health of the system, jumped from $33 million in 2005 to $37 million in 2007, as the minister reported Wednesday during a presentation made to members of the Saving power of the state, key figure for measuring the health of the system jumped from 33 2005 375 2007, as reported Wednesday by the minister, during a presentation made to members of the Asociación Panameña de Ejecutivos de Empresa (Apede).

The surplus also reflects the fact that not all the investments budgeted were actually made. The State spent $973 million, or 270 million less than expected.

The president of Apede, Juan Carlos Mastellari, said that the Apede is opposed to the general wage adjustment that some sectors have asked for in response to rising inflation and the erosion buying power. He suggested the Government combat the problem another way: lowering tariffs, eliminating the CAIR, adjusting tax rates for the middle class and allowing school fees to be deducted from taxes.