US$300 Million Loan Will Also Provide Social Assistance to 60 Percent of Population Living in Extreme Poverty
WASHINGTON, September 8, 2016 – The World Bank Board of Executive Directors approved a US$300 million loan today to support Panama’s efforts at strengthening international tax transparency, financial integrity and fiscal management. Furthermore, the loan seeks to improve social programs, among other services, to ensure that 60 percent of the population living in extreme poverty benefits from at least one welfare program.
The “Programmatic Shared Prosperity Development Policy Financing” supports the Government of Panama in the areas of transparency, decentralization, automatization of internal public financial management processes and debt payments. It will also seek to improve social assistance programs, as well as energy services and educational quality.
In order to improve the exchange of international tax information, Panama commits itself, through this operation, to adopt globally accepted standards for the exchange of financial information with other countries (The Common Reporting Standard for Automatic Exchange of Financial Account Information in Tax Matters - CRS). This guarantees that the ownership and identity of information, as well as reliable accounting records, will be available to all competent bodies.
In the social area, the priority is to strengthen program efficiency and transparency. This is expected to improve coverage and targeting of social assistance payments.
“The World Bank is backing the ambitious reform program that our Government has carried out in terms of transparency, fiscal management, education, energy and improved social programs, which in recent years have been an important factor in poverty reduction. Increasing the efficiency of conditional cash transfers, such as those of the Red de Oportunidades program, will limit losses and benefit those most in need. In the same vein, we have promoted the disbursement of program benefits through the banking system, thus promoting the transparency with which these resources are managed,” said Dulcidio de la Guardia, Panama’s Minister of Economy and Finance.
In order to strengthen transparency in resource management, it is expected that 90 percent of Central Government funds will be channeled through a Single Treasury Account, thus generating savings to the public treasury and better public fund management and debt payment processing.
Improvements in fiscal management will also favor the continuity of the solid growth performance enjoyed by Panama, as they facilitate a stable macroeconomic framework and sound debt management based on fiscal prudence. “A stable fiscal policy can ensure that the earnings made in times of growth can be shared with everyone,” said Anabela Abreu, World Bank Representative in Panama.
In the area of education, the loan seeks to strengthen the monitoring of educational quality by having Panama participate in international evaluations, and via programs such as Panama Bilingue and Bachilleratos Tecnicos, focused on facilitating youth employability.
Concerning money laundering, the intention is to implement the new legal framework effectively by annually inspecting at least 50 percent of the banks operating in the country.
“In recent years, Panama has taken significant steps in the fight against money laundering and in the financial transparency front, but it still has some way to go. This operation supports the Government in strengthening international tax transparency, financial integrity and fiscal management frameworks. These reforms are essential in safeguarding the country’s role as an international financial center,” Abreu said.
Other processes that will benefit from this loan include the gradual decentralization process undertaken by the Government and which came into effect in January with the Decentralization Law, which earmarks public resources directly to local governments so that they can enjoy greater autonomy. It also seeks to adopt a disaster risk management framework, in such a way that fiscal sustainability is not jeopardized if a natural disaster takes place.
The US$300 million loan from the International Bank for Reconstruction and Development includes a 20.5-year maturity period and a two-year grace period.
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