Bill 138.

Summary.

The bill amends Law 34 of 2008 so that its rules apply to the economic and financial administration of every public sector entity in Panama. It makes each entity’s authorities responsible for compliance with the fiscal rule and targets. It assigns monitoring to officials of the Ministry of Economy and Finance (Ministerio de Economía y Finanzas), the Comptroller General’s Office (Contraloría General de la República), and the National Bank of Panama (Banco Nacional de Panamá). It also establishes shared responsibility, within their respective powers, for other public officials, including those of the Supreme Court of Justice (Corte Suprema de Justicia) and the Electoral Tribunal (Tribunal Electoral).

The bill revises the definitions used to calculate balances, revenue, expenditure, and various measures of Non Financial Public Sector debt. It distinguishes the Central Government (Gobierno Central), General Government (Gobierno General), consolidated agencies, and non financial public enterprises. Central Government includes the National Assembly (Asamblea Nacional), the Judicial Branch (Órgano Judicial), and the Public Prosecutor’s Office (Ministerio Público), among other institutions; General Government also includes the Social Security Fund (Caja de Seguro Social). The definition of the Non Financial Public Sector excludes, among others, the Panama Canal Authority (Autoridad del Canal de Panamá), Aeropuerto Internacional de Tocumen, S.A., Empresa Nacional de Autopistas, S.A., and Empresa de Transmisión Eléctrica, S.A. Other definitions cover the recording of commitments, accrued obligations and payments, special funds, turnkey and deferred payment projects, fiscal risks, and disclosure of accounts payable.

The bill replaces the chapter on financial limits with fiscal rules and targets. It requires a declining deficit path toward 2.5% of nominal Gross Domestic Product from 2027 and authorizes the Executive Branch (Órgano Ejecutivo) to review that target every five years. It sets an intermediate net public debt target of 50% or less within ten years from fiscal year 2026, followed by 40% over the next five years. Borrowing is limited to financing the Central Government deficit and public debt amortization, subject to an exception for unforeseen events or force majeure. A primary surplus would be required from fiscal year 2028.

The Ministry may request a temporary suspension of the rules because of a national emergency, economic slowdown, or decline in tax revenue, by submitting a reasoned exception report to the Cabinet Council (Consejo de Gabinete) and notifying the Comptroller General’s Office. An authorized exception would go to the National Assembly for approval after consideration by the Economy and Finance Committee (Comisión de Economía y Finanzas). The bill sets limits and duration for exceptions, requires a correction plan and gradual restoration of the targets, and subjects withdrawals from the Panama Savings Fund (Fondo de Ahorro de Panamá) to the limit in its governing law. In a general election year, it requires compatible fiscal plans and restricts obligations and budget commitments during the administration’s final six months.

Each administration would adopt and publish a Strategic Government Plan. The Ministry would publish five year macroeconomic and fiscal projections, with assumptions assessed by the Fiscal Council (Consejo Fiscal) or based on International Monetary Fund (Fondo Monetario Internacional) projections. The National Institute of Statistics and Census of the Comptroller General’s Office (Instituto Nacional de Estadística y Censo de la Contraloría General de la República) would provide Gross Domestic Product estimates. The bill creates the Expenditure Control Unit (Unidad de Control del Gasto) and provides for nonbinding Fiscal Council opinions and semiannual assessments of targets, budgets, debt, and risks. The provisions would reach public entities and could concern government creditors, contractors, suppliers, and sectors involved in public investment.