at Bloomberg discuss how Panama’s President Juan Carlos Varela said he’ll ask Congress for authorization to raise the budget deficit limit after the previous government boosted spending ahead of elections earlier this year.
Varela, who took office July 1, said he’ll send a proposal to Congress within a month to increase the budget deficit limit to 3.7 percent of gross domestic product from 2.7 percent. The announcement by Varela comes a week after the Central American nation sold $1.25 billion in 10-year bonds.
“We’re going to finish the public investment projects we have committed to, while also managing the debts they are leaving behind,” Varela said in an interview with El Financiero-Bloomberg Television in New York yesterday. He described the change to the fiscal responsibility law as part of a “transition” that needs to be implemented this year.
Varela said Panama’s economy, the fastest-growing in Latin America over the past five years, would expand 6.5 percent to 7 percent next year, fueled in part by a 10 percent increase in foreign direct investment. The country is poised to complete work next year on a third set of locks on an expanded Panama Canal, a $5.25 billion project that has helped transform the country of 3.6 million people into a banking and logistics hub.
Deputy Economy Minister Ivan Zarak said earlier this month that the government would delay $650 million of “high-risk” projects, including a convention center and hospital, started under President Ricardo Martinelli’s administration. The budget deficit was 3.2 percent of GDP in the first half of the year.
Panama’s dollar bonds have returned 11.4 percent this year, above the 8.1 percent average for emerging markets, according to JPMorgan Chase & Co.’s EMBIG index. The country is rated BBB, the second-lowest investment grade ranking, by Standard & Poor’s, putting it in the same category as Spain and the Philippines.