Panama/WB: Greater Fiscal Space and Social Protection Efficiency for One Million Panamanians

March 26, 2013

Improved Tax Revenue and Fiscal Management,Transparency and Efficiency of Social Programs

WASHINGTON DC, March 26th, 2013 – The World Bank Board of Directors approved a new US$100 million programmatic loan to support Panama’s  efforts to improve tax revenue, fiscal management and transparency, and make social programs — which currently benefit more than 925,000 Panamanians — more efficient.

This is the second loan in a series of three programmatic loans supporting the Government’s plan to modernize and strengthen financial management institutions and public procurement systems.

The plan also includes measures to increase transparency and the exchange of tax information, expand the fiscal space via tax reforms and improve the coverage and efficiency of the “Beca Universal” (Universal Scholarship), “100 a los 70” (100 at 70) and “Red de Oportunidades” (Opportunity Network) social protection programs. The first US$100 million loan in the programmatic series was approved by the World Bank’s Board of Directors on May 4th, 2011.

The Government of Panama has already taken steps to reach its goal to increase tax revenue by 13 percent of Gross Domestic Product (GDP) in 2014 –from 11 percent of GDP in 2009. Such measures include  expansion of the tax base, reducing fiscal exemptions and establishing a Major Contributor Unit. In order to improve the exchange of tax information, Panama has responded to 21 tax information requests from foreign jurisdictions.

“World Bank support is essential to ensure that the Government of Panama keeps improving the efficiency and transparency of public administration.   Measures to increase tax revenue, improve   tax information exchange, establish best practices for public procurements and strengthen social programs will provide better social and economic opportunities for all and help reduce poverty in Panama.” said Frank De Lima, Minister of Finance of Panama.

In order to increase the transparency and efficiency of public procurements, Panama has also strengthened the Government’s contracting and procurement system through the creation and widespread implementation of the PanamáCompra e-platform and the inclusion of more government agencies in framework agreements for the procurement of goods.

These framework agreements, which allow the Government to obtain lower prices and improved performance from suppliers, now include a catalog of 5,629 items commonly purchased by public institutions, more than double the 2,452 items registered in 2009.

With regards to the coverage and efficiency of social protection programs, the Social Development Ministry (MIDES, in Spanish) has adopted new eligibility criteria for beneficiaries of the “100 a los 70” program, which provides US$100 to more than 86,000 pensioners over 70 years of age that are neither covered by a pension plan nor the “Red de Oportunidades” program (which directly benefits more than 357,000 people).

Moreover, the Training and Utilization of Human Resources Institute (IFARHU) has expanded the “Beca Universal” program, which grants an annual scholarship of US$180 to students enrolled in public schools. The program now includes scholarships for students in grades 1 through 12, benefiting more than 481,000 students in public educations centers. Beca Universal also benefits students from low income families attending private schools.

“As part of its Partnership Strategy with Panama, the World Bank supports the Government’s plans to strengthen its fiscal position, improve the efficiency of the public sector and benefit more Panamanians through social programs. Efforts to improve public financial management undoubtedly could help attain the goal of reducing poverty and increasing opportunities for all,” said Ludmilla Butenko, World Bank Representative in Panama.

The Government of Panama has also taken steps to strengthen its debt management capacity with the formalization of specialist units in the Public Credit Directorate of the Finance Ministry. It has also  established a strategy to further develop the domestic debt market, with the objective of increasing certainty, improve liquidity and expand the investor base.

The US$100 million “Second Programmatic Development Policy Loan for Fiscal Management and Efficient Spending” has a 20-year maturity period and a 3-year grace period.


Media Contacts
In Washington
Ricardo Vargas
Tel : (202) 458-0777
In Central America
Cesar Leon
Tel : (502) 2329-8063