$ 13 billion budget, utopia or reality?

This is the article title in La Prensa regarding the increased government spending for 2011. Although there has been increases in tax revenue, all is dependent on the world economic climate and things are not looking so rosy. Yet governments continue to increase spending based on an optimistic view of the worlds economy. This article gives us a good overview of all the areas of expenditure and expresses some of the concerns about meeting them. I especially like this question from the writer. "The projected behavior of debt, the budget of 2011 and all strategic plans of government find their reason for being in a strong pace of economic growth. What if this assumption is not met?" Good question.

Machine translated from La Prensa.

Roberto Gonzalez Jimenez
[email protected]

This week began budget hearings in the National Assembly of the various government institutions for the next year.

From the discussion on the Budget Committee there may be some modification in the distribution of resources among the entities. What will not change, said the Economy and Finance Minister, Alberto Vallarino, is the total budget: $ 13.009 Billion, the highest in history.

This amount is shared between the central government, decentralized institutions, which stresses the Caja de Seguro Social-owned enterprises, as Tocumen, SA or the Colon Free Zone, and financial intermediaries, among which are the National Bank of Panama , the Savings Bank or the National Securities Commission.

But the amount of $ 13 billion raised several questions: Is it viable to have a budget 23% higher than the previous year? Where did you get this additional income?

The Government said the growing economy and tax reform will generate more revenue. "The constant is higher budgets every year," said Vallarino.

The forecast of gross domestic product growth for 2011 is 9.5% in nominal terms and 6.5% in real terms. That rise in revenue to the state.

For its part, the tax burden will grow as a result of tax reform. Brush each tax revenues of $ 6.8 billion more than the current force.

Only with the transfer tax on personal property and services (ITMBS), whose rate is 7% since 1 July, the government hopes to raise $ 226.8 million more than this year.

In direct taxes, which include income taxes for individuals and corporations, among others, is projected revenue of $ 1.655 Billion.

It also provides the state capital income of $ 919 million, $ 1.400 billion more than in the budget this year.

This kind of revenue will come from the sale of assets and credit resources, as a result of the maturity of bonds or loans.

The revenue forecast will be tested in the course of the year. The challenge is that the income level meets the budget, which this year has not always happened. The Government can no longer wield the much-used argument that the budget was prepared by the previous administration.

The Government in its task of raising revenues this year, has turned up to collect 5000 tons of scrap generated revenues of $422 thousand.

Execution

Economist Rolando Gordon said the budget increase is possible if the economy continues to grow. "But remember that there are still problems in the international economy and that could affect local," he added.

Gordon said he had more doubts about the Government's capacity to implement investments that are being raised than the very fact of obtaining resources.

One of the shortcomings of the current administration has been the weak budget implementation. In the first half of 2010, investment fell 10.2% over last year.

Among the investment projects to be implemented next year include the construction of the Metro, which will receive $500 million, although the game could change with the winning proposal, the extension of the road Divisa-Las Tablas, with $ 117 million; sanitation for the Bay of Panama will receive $ 97 million, $ 80 million for the road David-Boquete, expansion of the highway Arraiján-La Chorrera receive $ 70 million, and completion of the second phase of the coastal strip and the beginning of the third allocated $48.3 million.

These are some of the proposed investment which in total, will add about $500 million.

Expenses

However, the majority of the budget (53%) will be used to defray operating expenses of the state.

Professional services-the State payroll, representing an expenditure of $ 2. 590 Billion, a 11.5% increase this year. The promise to cut spending seems to have no reflection, for the moment, in the 2011 budget.

The Government has argued that a number of special laws which force up wages of certain officials, causing reduced the margin.

For Gordon, who also referred to these special laws, said the case for increased spending to appoint more doctors, nurses, policemen and reinforce certain social, not a bad investment appeal. "It would be well if it is to increase staff," he said.

Another promises to keep is the revision of subsidies, far from diminishing, are increasing.

The "100 to 70" will claim $ 84 million, the energy subsidies for those who consume less than 500 kilowatts will be a charge of $ 65 million, $ 140 million will go to the scholarship program of educational assistance and economic aid, which includes the Universal Fellowship.

The education sector that has traditionally been allocated more resources without visible results, will be one of the main sources of investment.

The Ministry of Education has the largest budget within the Executive: $ 1143.6 million.

The Ministry of Health, another of those who have shown little efficiency, has the second largest budget, $ 1.078 million.

Also highlight the large budget of the Ministry of the Presidency - $ 774.6 million, "which is assigned the Secretariat of the Metro, and the newly created Ministry of Safety, which set aside $ 420.1 million next year.

The increased costs will make the fiscal balance of the nonfinancial public sector, which is regulated by the Social Responsibility Law  to again be in deficit.

Program a deficit of $436 million, equivalent to 1.5% of gross domestic product (GDP) to exceed, if not fail to government estimates, the $ 29 billion.

Public debt, therefore, continue to grow in absolute terms. Probably ended the year with about $ 12 billion, but its relationship to GDP would fall below 40%.

The projected behavior of debt, the budget of 2011 and all strategic plans of government find their reason for being in a strong pace of economic growth. What if this assumption is not met?