The 2024-2025 economic reform's timeline: two steps forward, still four to go

PANAMA - In Brief 01 Nov 2024 by Marco Fernandez

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Summary We discuss the key reforms that will take place during the Mulino administration. The Fiscal Responsibility Law (LRSF) and the Public Sector Budget for 2025 were approved last week, with political setbacks. The Legislative Assembly (AN) introduced changes in the proposal of the Ministry of Economy and Finance (MEF) that could create rigidities in the path of convergence to a 2.5% of GDP ceiling by 2029. The initial attempt of Minister Chapman to design a conservative budget failed when legislators (for different reasons) pushed for expenditures 1.4% above last year budget, rather than the 12% reduction that the Executive proposed. We consider that current revenue projections are overestimated, but that according to article 247 of the Constitution, MEF might reduce the non-primary expenditures during the year if revenues come short of the projections. A tax deferral was also approved by the legislators, which could boost revenues during the next months of 2024. However, they denied the Tax Revenue Agency (DGI) a say in the final version. On November 6 the proposal for the public pension reform will be sent to the Legislative chamber. The future of the copper mining operation remains at a standstill. Legal and constitutional issues are severe obstacles to further exploitation by First Quantum Corporation. The Panama Canal Authority (ACP) is already advancing in the legal and technical procedures to re-establish the limits of the watershed as a necessary condition to the long-term viability of the Canal. The Fiscal Responsibility Law: new ceilings and restrictions Law 224 of October 28, 2024, established the deficit ceilings for the next five years, created the Fi...