The end of the electricity subsidy affected consumers

Housing costs have skyrocketed Consumer price indexwhich measures inflation in Panama, in the first month of the year.

In simpler terms, the cost of living for citizens has increasedmainly due to the cancellation of the extraordinary subsidy for the price of electricity due to the consequences of the covid-19 pandemic.

The monthly variation of housing costs was 9.5%, much higher than that of other costs, such as traffic (o.6%) and education (0.5%).

When determining the impact of the cancellation of the said subsidy, the increase was 39.6% compared to the month of December 2022 and 41.4% compared to January 2022.

To show the magnitude of the situation, the second increase that followed was that of plane tickets, with 18.5% compared to December and 35.6% compared to January last year.

This effect makes it possible to measure the immediate consequences of the termination of the extraordinary measures introduced due to the health crisiswhich led to an economic crisis, which still affects the population.

The government recently approved the extension the validity of other subsidies granted during the pandemic.’

39.6%

The reason for this is the increase in the price of electricity compared to December last year.

9.5%

there was an increase in housing costs last January compared to December.

First, it was digital voucherfor the months of January and February, for more than 200 thousand people who still receive it.

It was later freezing of gasoline and diesel priceswhich is valid until April 1.

He then extended the 30% discount for another six months the price of the drugwhich, although not a measure taken directly by the pandemic, is related to the high prices of these products, at a time when the pockets of Panamanians are squeezed.

Was it necessary to keep the electricity subsidy?

The economist Maribel Gordon believes that this was necessary due to reduced wage capacity in conditions of high prices of goods and services.

“You have to remember that electricity in this country has an almost monopolistic structure. “Providers have guaranteed territories, where they have no direct competition,” said Gordon.

The calculation that has been made since the abolition of the subsidy is that for some families it represented an increase of 30% to 50% in the monthly payment.

“This will generate an upward wave in the prices of other necessary goods and services will affect the purchasing power of the populationwhich is counterproductive in an already weak economy”, said the economist.

From the business sector, universal subsidies are not sustainable and therefore must be directed at the most vulnerable sectors.

In that sense, President of the National Council of Private Enterprise (Conep), Rubén Castillo Gillhe pointed out that it is necessary to implement already conducted studies in order to connect education with the needs of the economy.

“If so, we will be able to notice that subsidies will decrease, not because someone decided to abolish them, but simply because These people will be associated with productive economic activity“, said the businessman.

Castillo Gill was adamant saying that it is a society that depends solely on subsidies sick society.

“We must have a productive society”said the president of Conep.