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LatinNews Daily - 20 July 2018

In brief: Panama

Panama: Panama’s economy & finance minister, Edya Varela de Chinchilla, has announced that the government led by President Juan Carlos Varela (her cousin) has withdrawn a request for exemption from the 71-member unicameral national legislature, which would permit it to increase the fiscal deficit by 1% of GDP in 2018. The law of social and fiscal responsibility requires the government to cap the deficit at 0.5% of GDP, which the Varela government had wanted to increase to 1.5% (or US$300m for 2018) to finance various governmental investment projects to “dynamise the economy”. This followed the 1 June announcement by the International Monetary Fund (IMF) that it was revising downwards its economic growth forecast for Panama in 2018 by one percentage point to 4.6%, citing as the main reason for its decision, the impact of strikes in the construction sector earlier in the year. At the time, the economy & finance ministry (MEF) had sought to stress that the petition for extra funds was for economic rather than political reasons, although Panama will hold a general election in 2019. An MEF press release notes that the exemption was withdrawn yesterday (19 July) “with the objective of carrying out a technical debate” and to allow the “widening of consultations with different social sectors of the country”, although it said that it “maintains its interest” in reforming the social and fiscal responsibility law. The decision has been welcomed by the political opposition which controls the legislature.

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