Public Finance and Institutional Development Policy Loan

closed

The Panama Public Finance and Institutional Development Policy Loan Project supports the implementation of the initial phase of the Government's new development program, as described in its Strategic Vision document, with a focus on restoring fiscal sustainability and improving fiscal transparency and public financial management. This operation is conceived as a one-time operation, based on passage and implementation of relevant reforms which will achieve substantial measurable outcomes by the end of 2006. This project also indicates and assesses the Government's future planned actions, and notes its medium-term benchmark indicators (end- 2009). The actions supported by the project are expected to benefit Panama by helping to create a more stable macroeconomic environment, introducing greater transparency into public financial management, and contributing to improved efficiency of public spending. As direct benefits, the Loan is also expected to help Panama obtain better financial terms for public borrowing and to diversify its external sources of public finance. The main sources of risk are political (inability to maintain popular support for the reform agenda) and economic (slowdown in trade-related service activities and high debt service burden). The first source of risk is limited by the DPL's narrow focus on fiscal and public sector management, where the main legislative actions already occurred.