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. "

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