The new government will face a serious liquidity crisis

Current Government is facing a severe liquidity crisis that will be inherited by whoever is elected president of the Republic of Panama on May 5, and the situation is worrying because everything indicates that the Central American country will have to take on even more debt.

The 2023 collection was $252 millionit is lower than the budget and fiscal deficit of 2.95% for the year, UPCG reported.have seriously questioned international investment banks, including Morgan Stanley.

According to this company, this achievement was partially due to the sale of land for $500 million to the Panama Canal and a transfer made by First Quantum worth USD 562 million (0.7% of GDP) is included in these estimates.

In this regard, the former president of College of Economists, Olmedo Estrada states: “The situation is critical due to the fact that the budget of more than 30 billion dollars has to be divided 50% for the outgoing government and 50% for the incoming one. What I don’t know is whether the outgoing government will have 50% liquidity or you will have to request or generate debt to achieve liquidity.

He pointed out that just as the year 2023 ended with a deficit of 3 percent, it is possible that the situation will not be different this year either. Make sure that the deficit we will have is much higher than 3 percent and then we will have to ask to borrow the country. get the necessary liquidity because “In election years, income is definitely not the same as in non-election years.”

He emphasizes that as soon as the new government enters, it will start with a deficit that will be transferred, because it was said before the adoption of the budget that “expenditures should be reduced because when it is an election year Government revenues do not grow in the same way which grow in normal years because people stop in election years and don’t invest, don’t make payments that correspond to what they should be and that limits state revenue.”

Estrada states that whoever will rule from July 1, after winning the elections on May 5, will have a very big challenge, and the first challenge is the budget, because first they have a plan to The government needs to fulfill, and secondly, it has the challenge of fulfilling the budget that he will not have enough income to be able to fulfill all the proposals that are set forth in his campaign plan.’

30,690

million is Panama’s 2024 budget approved by the National Assembly.

7.4%

is the unemployment rate in Panama, until 2023, according to INEC.

In this regard, the expert in Inclusion in work and economic issues, René Quevedo, points out that the new government will inherit this situation, to which it is added that in 2024 it will not receive 375 million dollars from the mine, the Canal will pay 800 million dollars less to the state treasury, due to the drought, The crisis of the IVM program will worsen and the country will face the inevitable loss of its investment grade.

Given this scenario, The new government will face enormous challenges, including create confidence, attract private investment, create formal employment, inject liquidity into the productive sector, clean up public finances, eliminate bureaucracy and unnecessary paperwork, reduce the size of the state, as well as rationalize exemptions and subsidies and attract investment.

Quevedo believes that a plan of stabilization and economic honesty is urgently needed, which they include an injection of liquidity into the manufacturing sector and pay off debts suppliers and contractors ($1.7 billion, as far as we know).

On the other hand, he believes that it is necessary to generate the belief that investing in Panama is a good deal.“Without trust there is no investment, and without investment there is no employment,” he says.

Remember that the crisis is work Panama is not a business, but a trust.

Currently 2 out of every 3 jobs in of the private sector are informal and employed in companieswith less than 10 workers.

Small business owners, formal and informal, They are the backbone of employment in Panama.

Strengthening the structure MSME employment will depend on sustainability demand that generates their income.

This will be key to building trust in you business prospects and creation of formal jobs.