PANAMA’S  fiscal deficit next year will be cut  by 36 percent  reducing it from a projected $1.6 billion this year to $1 billion in 2017 according to government projections.

The reduction is due to the higher income generated by the expansion of the Panama Canal, which came into operation on June 26.

"The contributions of the Panama Canal will generate $550 million more in relation to the year 2016," said Minister of Economy and Finance Dulcidio De La Guardia.

Despite the decrease of the deficit, the government will have to enact a mechanism of the law of Social Fiscal Responsibility for the year 2017.

The law allows the government to raise the debt level if the contributions of the Canal do not reach 3.5 percent of the GDP.

De La Guardia presented the figures in the National Assembly on Tuesday July 26.

In a press conference, he explained that the accounts were prepared under the assumption of economic growth of 6 percent and inflation growth of 1 percent. He said the country's GDP was estimated to be $58.6 billion.

The 2017 budget will be $21.6 billion, 8 percent more than in 2016.

The budget of the non-financial public sector, whose balance sheets are regulated by the Fiscal Social Responsibility Law, will be $17 billion. Of that total, $11.9 billion (69.8 percent) will be allocated to operating expenses and $5.1 billion (30.2 percent) to investment.