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Panama will strengthen its fiscal management with IDB support

A $50 million credit will help improve public investment, tax administration, and efficiency and transparency of public spending

With a $50 million loan from the Inter-American Development Bank (IDB), Panama will strengthen its fiscal management to help raise public investment through a sustainable increase in tax revenues and improved efficiency and transparency in public expenditure management.

Panama has one of the lowest tax collection rates in Latin America and the Caribbean, representing about 11 percent of the country's gross domestic product (GDP). In 2004 per capita GDP was $4,470, rising to $7,712 in 2010, making Panama one of the lower middle income countries with the highest economic growth rates. It is expected that the Government Strategic Plan will carry out previously adopted tax reforms that will result in a permanent 2.5 percent increase in tax revenues. The additional revenues will boost public investment to levels of 10 percent to12 percent of GDP in 2011–2014.

The program will result in operational and physical reforms, better tax management and technology, and greater tax compliance. The consolidation of public expenditure management will increase the percentage of central government institutions that will use the National Public Investment System, which contains annual budgetary targets for public investment with indicators for results.

The program will also enhance the financial management and accounting of public resources and increase the quality of information. This will include an increase in the percentage of government institutions regulated by the Single Treasury Account. Training will be provided in the use of the web-based Integrated Financial Management platform.

The program will strengthen the Ministry of Economy and Finance, update its legal frameworks, streamline administrative and business procedures, improve operational support systems, and renovate physical and technological infrastructure. The program also includes training and consulting services, as well as the purchase of computer systems and equipment and support materials.

The IDB loan has an amortization period of 20 years with a grace period of 36 months and an interest rate based on LIBOR.

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