Sustainability of Public Debt in Central America

The Central American Institute for Fiscal Studies has concluded that only the public debts of Panama and Nicaragua, using official data, are sustainable in the medium term.

Friday, June 14, 2013

The main theme of the fifth edition of the 'Lente Fiscal Centroamericano' (Central American Fiscal Lens) is an analysis of debt sustainability in Central America, which depends greatly on interest payments on debt, economic growth, inflation, revaluation and management of the fiscal deficit.

The study concludes that only the public debts Panama and Nicaragua, using official data, are sustainable in the medium term.

In a passive scenario of global economic recovery, less international monetary liquidity, higher global commodity inflation and the return of capital from the bond market to stock market (shares), which could exacerbate current problems of sustainability of public debt, therefore all Central American countries are urged to improve their income, make more effective use of government spending and use debt in a more strategic and transparent manner.

"... 2012 was a year in which tax revenues began to grow less, as a result of the economic downturn, which resulted in lower growth rates for public expenditure. Even so, the fiscal deficit increased in Costa Rica, Honduras and Panama, while decreasing in Guatemala and El Salvador. In terms of tax reforms, both Honduras and Guatemala approved changes in the tax rules, the results of which will be measured from 2013. Panama continued to be the fastest growing country in the region, largely because of its investment budget and some private grants. Overall, the entire region still requires a strong agenda for transparency and accountability. "



More on this topic

Costa Rica's Fiscal and Political Sickness

October 2016

The ICEFI points to a "chronic political inability to achieve comprehensive fiscal agreement" which is jeopardizing the sustainability of the state in the medium and long term.

From a statement issued by the Central Institute for Fiscal Studies (Icefi):

Growing Fiscal Risks in Central America

August 2016

The countries facing the greatest risk of fiscal unsustainability within three years are El Salvador and Honduras, followed by Costa Rica and with less risk, Nicaragua and Panama.

From the  "Economic Outlook" section of the V Report on the State of the Region 2016:

Central America Fiscal Lens - 5th. Edition

October 2013

Analysis of debt sustainability in Central America, economic growth, inflation, revaluation and management of the fiscal deficit.

Central America Fiscal Lens No. 5 reported that gross domestic production in Central America in 2012 amounted to U.S. $184.000 million. The fastest growing economies were Panama, Costa Rica and Nicaragua.

Fiscal credibility and sovereign risk

January 2010

Fitch Ratings warned that although Central American sovereigns have resisted the global crisis pretty well so far, they now require fiscal consolidation in order to maintain their credit ratings.

Summary
Fitch‐rated Central American sovereigns have thus far withstood the destabilizing effects of the global economic and financial crisis, despite monetary and exchange rate policy challenges.

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