I am certain that there are many challenges that the new President of Panama will be facing, but let’s look at five economic challenges. The country must generate jobs, spend efficiently, pay off its high debt in an environment of high interest rates, reform the pension system and resolve the water crisis. That needs to happen in the next five years.
The country’s next president will take office marked by a series of crucial economic and financial challenges.
- Pension crisis. The low collection of worker-employer quota, with which pensions are financed, puts the Social Security Fund (CSS) in trouble. The projection was that there would no longer be reserves in the exclusively defined benefit subsystem. The new administrator of the country will have to face a bankruptcy program and real actuarial debts of the CSS between $65 billion and $75 billion, which would be what between now and 2079 would have to be paid to current and future pensioners who are part of the subsystem, according to the figures shared by the CSS Actuarial Technical Board.
- Public debt: The balance of the country’s total debt closed at $49,769 million as of March 31, 2024, according to the Public Financing Directorate of the Ministry of Economy and Finance. That compares to 34 trillion dollars in the United States. Almost one of every two dollars that the country owes corresponds to the debt produced by the government of Laurentino Cortizo. To reduce debt it will be crucial to reduce public spending. The increase in debt is the largest recorded during a presidential term, surpassing the three previous Cortizo governments. The balance published by the Ministry of Economy and Finance excludes the debt corresponding to the state companies ETESA, ENA, and Tocumen SA.
- Unemployment and informal employment. During the period between October 2021 and April 2022, a decrease in the unemployment rate was observed, going from 11.3% to 9.9%. But this decline is mainly attributed to the increase in the hiring of informal workers and civil servants.
- Economic growth. After facing the worst labor and economic crisis in its history, with the pandemic, the country is faced with the challenge of transforming its economy. To achieve this, it is crucial to attract investment, especially foreign direct investment (FDI). In addition, replace mining income and deal with GDP growth of 2.5%, well below 7.5% in 2023, due to the closure – after strong protests – of Minera Panamá , a large copper mine subsidiary of the Canadian First Quantum Minerals (FQM).
- Water crisis. Panama is surrounded by water, but unable to provide constant and adequate access to this vital resource. The country has 52 hydrographic basins and 500 rivers, most of which have abundant flow and short distances. But, 75 thousand people receive water through tank cars and it is estimated that 45% of the water is unaccounted for. Last year was the third driest year in the Channel Basin since the country began keeping records more than 140 years ago, due to changes in weather patterns, exacerbated by the impacts of climate change. For this reason, the Executive will have to decide whether it expands the limits of the basin so that the Canal can develop a water project and have more water storage capacity, or come up with a better idea.