PANAMA’S government will need an additional $2.8 billion in funding for 2016  as the country endeavors   to deal with a deficit that was out of control when it took office  and was faced by  a large number of turnkey projects whose cost was not reflected on the balance sheets until after the Martinelli administration left.

Minister of Economy and Finance Dulcidio De La Guardia said on Thursday, February 11, that $555 million will be earmarked for the payment of outstanding debt and the rest to finance projects.

The executive will get the resources from multinational banks, as well as bond issues. This will increase the balance of the public debt, which closed 2015 at $20.222 billion, equivalent to 39 percent of the gross domestic product, 2 percentage points higher than a year earlier, reports  La Prensa.

De La Guardia said that when this administration came to power, The debt-to-GDP ratio recorded a remarkable drop between 2004 and 2013. In that decade, the indicator went from 70 percent to 35 percent, but in the past two years the trend has reversed and the indicator rose to 37 percent in 2014 and 39 percent last year. This is a consequence of the increase in public spending from the administration of Ricardo Martinelli, coupled with a slowdown in the pace of growth of the local economy.

Net debt, which is calculated by subtracting the balance of the debt from the assets of the Panama Savings Fund, closed at a 36.7 percent. According to the law of fiscal social responsibility, the country's net debt cannot exceed the threshold of 40 percent.

While the government has sought to borrow more money, it has seen the cost of that borrowing decrease due to improvements in the country's credit rating. It fell from 7.66 percent in 2005 to 4.38 percent in 2015.

-