Central America: The Guatemala-based think tank Central American institute of fiscal studies (Icefi) has released a new report which warns that political instability and a lack of long-term planning has limited the capacity of some Central American states to implement effective public policies. The Icefi document reveals that the size of public spending was 21.4% of GDP in 2018 for Costa Rica, 20.4% in El Salvador, 20% in Honduras, 18.4% in Nicaragua, and 17.6% in Panama, while in Guatemala it was just 12.1% of GDP. The study also shows that in general, spending on operating costs for the Central American governments was constant at around 12.3% of GDP, while capital spending dropped to 3.6% of GDP from 3.7%. The study highlighted the cases of Costa Rica and Honduras – both of which had tried to reduce their fiscal deficits – while in Nicaragua the reduction in spending stems from the ongoing political instability. The Icefi study also found that “practically the whole region” lacks appropriate systems of planning such as evaluations of the cost/benefit of public policy decisions.
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