Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-80400) FOR A

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1 Public Disclosure Authorized Document of The World Bank Report No: ICR Public Disclosure Authorized Public Disclosure Authorized IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-80400) FOR A FIRST PROGRAMMATIC FISCAL MANAGEMENT AND EFFICIENCY OF EXPENDITURES DEVELOPMENT POLICY LOAN (US$100 MILLION) A SECOND PROGRAMMATIC FISCAL MANAGEMENT AND EFFICIENCY OF EXPENDITURES DEVELOPMENT POLICY LOAN (US$100 MILLION) AND A THIRD PROGRAMMATIC FISCAL MANAGEMENT AND EFFICIENCY OF EXPENDITURES DEVELOPMENT POLICY LOAN (US$200 MILLION) TO THE REPUBLIC OF PANAMA Public Disclosure Authorized August 23, 2016 Macroeconomics and Fiscal Management Global Practice Central America Country Management Unit Latin America and the Caribbean Region

2 REPUBLIC OF PANAMA GOVERNMENT FISCAL YEAR January 1 December 31 CURRENCY EQUIVALENTS (Exchange rate effective as of August 23, 2016) PAB 1.00 = US$1.00 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS ANIP CCT CPS DGCP DGI DFP DPL GDP IADB IBRD IFARHU IFC National Public Revenue Authority IMF Conditional Cash Transfer ITBMS Country Partnership Strategy ITU General Directorate of Public Procurement LTU General Directorate of Revenues MEF MIDES Directorate of Public Financing MINSA OECD PFM Development Policy Loan Gross Domestic Product PDO Inter-American Development Bank International Bank for Reconstruction and SFRL Development TIEA Human Resources Promotion Institute International Finance Corporation International Monetary Fund Goods and Services Sales Tax International taxation unit Large Taxpayer Unit Ministry of Economy and Finance Ministry of Social Development Ministry of Health Organization for Economic Co-operation and Development Public Financial Management Program Development Objectives Social and Fiscal Responsibility Law Tax Information Exchange Agreement Vice President: Country Director: Global Practice Senior Director: Practice Manager: Task Team Leaders: ICR Task Team Leader: ICR Primary Author Jorge Familiar J. Humberto Lopez Carlos Felipe Jaramillo Pablo Saavedra Friederike N. Koehler-Geib Rong Qian Marco Antonio Hernandez Ore Ana Lucia Armijos ii

3 REPUBLIC OF PANAMA First Programmatic Fiscal Management and Efficiency of Expenditures Development Policy Loan (P123255) Second Programmatic Fiscal Management and Efficiency of Expenditures Development Policy Loan (P127332) Third Programmatic Fiscal Management and Efficiency of Expenditures Development Policy Loan (P146942) CONTENTS A. Basic Information... iii B. Key Dates... iii C. Ratings Summary... iv D. Sector and Theme Codes... v E. Bank Staff... vi F. Results Framework Analysis... vii G. Ratings of Program Performance in ISRs... xi H. Restructuring (if any)... xi 1. Program Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1. Panama Key Macroeconomic Indicators Annex 2. Policy and Results Matrix Annex 3. Prior Actions for the DPL series Annex 4. Analytical and Advisory Activities (AAA) Supporting the DPL Program Annex 5. Bank Lending and Implementation Support/Supervision Processes Annex 6. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 7. List of Supporting Documents ii

4 A. Basic Information Program 1 Country Panama Program Name First Programmatic Development Policy Loan Program ID P L/C/TF Number(s) IBRD ICR Date 08/18/2016 ICR Type Core ICR Lending Instrument DPL Borrower Republic of Panama Original Total USD M Commitment Disbursed Amount USD M Implementing Agencies: Ministry of Economy and Finance Co-financiers and Other External Partners: Not Applicable Program 2 Country Panama Program Name Second Programmatic Development Policy Loan Program ID P L/C/TF Number(s) IBRD-80400,IBRD ICR Date 08/18/2016 ICR Type Core ICR Lending Instrument DPL Borrower Republic of Panama Original Total USD M Commitment Disbursed Amount USD M Implementing Agencies: Ministry of Economy and Finance Co-financiers and Other External Partners: Not Applicable Program 3 Country Panama Program Name Third Programmatic Development Policy Program ID P L/C/TF Number(s) IBRD-82390,IBRD ICR Date 08/18/2016 ICR Type Core ICR Lending Instrument DPL Borrower Republic of Panama Original Total USD M Commitment Disbursed Amount USD M Implementing Agencies: Ministry of Economy and Finance Co-financiers and Other External Partners: Not Applicable B. Key Dates Development Policy Loan - P Process Date Process Original Date Revised / Actual Date(s) Concept Review: 02/03/2011 Effectiveness: 04/27/ /26/2012 Appraisal: 03/16/2011 Restructuring(s): 04/30/2012 Approval: 05/03/2011 Mid-term Review: 03/01/2012 Closing: 04/30/ /30/2012 iii

5 Second Programmatic Development Policy Loan - P Process Date Process Original Date Revised / Actual Date(s) Concept Review: 11/15/2012 Effectiveness: 07/29/ /18/2013 Appraisal: 02/04/2013 Restructuring(s): Approval: 03/26/2013 Mid-term Review: 06/25/2014 Closing: 06/30/ /30/2014 PA Third Programmatic Development Policy - P Process Date Process Original Date Revised / Actual Date(s) Concept Review: 10/09/2013 Effectiveness: 03/27/ /19/2014 Appraisal: 11/07/2013 Restructuring(s): Approval: 12/30/2013 Mid-term Review: Closing: 01/30/ /30/2015 C. Ratings Summary C.1 Performance Rating by ICR Overall Program Rating Outcomes Risk to Development Outcome Bank Performance Borrower Performance Moderately Satisfactory Moderate Satisfactory Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Overall Program Rating Bank Ratings Borrower Ratings Quality at Entry Satisfactory Overall Borrower Performance Moderately Satisfactory Quality of Supervision: Satisfactory Overall Bank Performance Satisfactory C.3 Quality at Entry and Implementation Performance Indicators Development Policy Loan - P Implementation QAG Assessments (if Indicators Performance any) Rating: Potential Problem Program No at any time (Yes/No): Quality at Entry (QEA) None Problem Program at any Quality of Supervision No None time (Yes/No): (QSA) DO rating before Satisfactory Closing/Inactive status iv

6 Second Programmatic Development Policy Loan - P Implementation QAG Assessments (if Indicators Performance any) Potential Problem Program No Quality at Entry (QEA) None at any time (Yes/No): Problem Program at any Quality of Supervision No None time (Yes/No): (QSA) DO rating before Satisfactory Closing/Inactive status PA Third Programmatic Development Policy - P Implementation QAG Assessments (if Indicators Performance any) Potential Problem Program No Quality at Entry (QEA) None at any time (Yes/No): Problem Program at any Quality of Supervision No None time (Yes/No): (QSA) DO rating before Satisfactory Closing/Inactive status Rating: Rating: D. Sector and Theme Codes Development Policy Loan - P Original Actual Sector Code (as % of total Bank financing) Central government administration Compulsory pension and unemployment insurance Primary education 3 3 Secondary education 3 3 Theme Code (as % of total Bank financing) Debt management and fiscal sustainability Education for all 6 6 Public expenditure, financial management and procurement Social Safety Nets/Social Assistance & Social Care Services Tax policy and administration Second Programmatic Development Policy Loan - P Original Actual Sector Code (as % of total Bank financing) Central government administration General public administration sector Other social services Primary education v

7 Theme Code (as % of total Bank financing) Debt management and fiscal sustainability Income Support for Old Age, Disability & Survivorship Public expenditure, financial management and procurement Social Safety Nets/Social Assistance & Social Care Services Tax policy and administration PA Third Programmatic Development Policy - P Original Actual Sector Code (as % of total Bank financing) Capital markets Central government administration Other social services Primary education 7 7 Secondary education 7 7 Theme Code (as % of total Bank financing) Education for all Other Financial Sector Development Social Protection and Labor Policy & Systems Social Safety Nets/Social Assistance & Social Care Services Tax policy and administration E. Bank Staff Development Policy Loan - P Positions At ICR At Approval Vice President: Jorge Familiar Calderon Pamela Cox Country Director: J. Humberto Lopez Carlos Felipe Jaramillo Practice Manager/Manager: Pablo Saavedra Rodrigo A. Chaves Task Team Leaders: Friederike N. Koehler-Geib Christian Yves Gonzalez Amador Rong Qian Jasmin Chakeri ICR Team Leader: Marco Antonio Hernandez Ore ICR Primary Author: Ana Lucia Armijos vi

8 Second Programmatic Development Policy Loan - P Positions At ICR At Approval Vice President: Jorge Familiar Calderon Hasan A. Tuluy Country Director: J. Humberto Lopez Carlos Felipe Jaramillo Practice Manager/Manager: Pablo Saavedra Auguste Tano Kouame Task Team Leaders: Friederike N. Koehler-Geib Friederike N. Koehler-Geib Rong Qian Maria Gonzalez de Asis ICR Team Leader: Marco Antonio Hernandez Ore ICR Primary Author: Ana Lucia Armijos PA Third Programmatic Development Policy - P Positions At ICR At Approval Vice President: Jorge Familiar Calderon Hasan A. Tuluy Country Director: J. Humberto Lopez Carlos Felipe Jaramillo Practice Manager/Manager: Pablo Saavedra Auguste Tano Kouame Task Team Leaders: Friederike N. Koehler-Geib Friederike N. Koehler-Geib Rong Qian Rong Qian ICR Team Leader: Marco Antonio Hernandez Ore ICR Primary Author: Ana Lucia Armijos F. Results Framework Analysis Program Development Objectives (from Program Document) Support the Government of Panama in: (i) mobilizing domestic tax revenue and increasing tax transparency; (ii) modernizing public procurement practices; (iii) improving the institutional arrangements for debt management; and, (iv) expanding social transfer programs and improving the capacity of institutions for targeting. Revised Program Development Objectives (as approved by original approving authority) For DPL3 the wording of the program development objective was slightly adjusted to make it more specific and better aligned with the four components of the operation. The focus of the reform was broadened to include new reforms aimed at improving the capacity of institutions for targeting social transfers. As a result, the pillars and the results indicators were adjusted to strengthen the linkages between the supported actions and the expected outcomes. vii

9 Indicator(s) Development Policy Loan - P Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Second Programmatic Development Policy Loan - P Original Target Baseline Values (from Indicator Value approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years PA Third Programmatic Development Policy - P Indicator Original Target Actual Value Formally Baseline Values (from Achieved at Revised Value approval Completion or Target Values documents) Target Years Indicator 1 : Central government tax revenue as a share of GDP is at least 12 percent in 2014 Value (quantitative or 11 percent 13 percent 12 percent 11 percent Qualitative) Date achieved 12/31/ /31/ /31/ /31/2014 Comments (incl. % achievement) Not Achieved. The tax-to-gdp ratio maintained the baseline value of 11 percent, due to exogenous factors that affected tax collection (e.g., lower oil prices and free trade agreements that reduced imports tax revenues). Indicator 2 : ITBMS revenue increased by at least 1 percentage point of GDP. Value (quantitative or 2.3 percent of GDP 3.3 percent of GDP 3.1 percent of GDP Qualitative) Date achieved 12/31/ /31/ /31/2014 Comments (incl. % achievement) Partially Achieved. ITBMS revenue increased significantly, by 0.8 percentage points, falling slightly short of the target value by only 0.2 percentage points of GDP, as a result of shocks that lowered sales tax collection on imports. Indicator 3 : The Large Taxpayer Unit (LTU) covers at least 55 percent of total tax revenue in 2014 Value (quantitative or 0 percent 55 percent 31 percent Qualitative) Date achieved 12/31/ /31/ /31/2014 Comments (incl. % achievement) Partially Achieved. By 2014, the LTU covered 31 percent of total income tax collection. Given institutional changes, the Tax Authority deemed this indicator appropriate and highly satisfactory, as the primary focus of the LTU is to monitor the income tax. viii

10 Indicator 4 : By 2014, Panama has signed 12 tax information exchange agreements (TIEAs) and has exchanged information as requested. Value (quantitative or No TIEAs in place 12 TIEAs 9 TIEAs Qualitative) Date achieved 12/31/ /31/ /31/2014 Comments (incl. % achievement) Indicator 5 : Value (quantitative or Qualitative) Partially Achieved. Panama signed 9 TIEAs and is in the process of signing 4 more. The country exchanges tax information upon request and in 2016 decided to sign the OECD s Multilateral Tax Information Sharing Convention (to exchange with 98 countries). Central government agencies and all others subject to Law 22 and its modifications use framework agreements and the number of catalogue items procured under those framework agreements is increased. 4,181 catalogue items 7,300 catalogue items 11,801 catalogue items Date achieved 12/31/ /31/ /31/2014 Comments Achieved. The target has been exceeded by 62 percent. Central government agencies (incl. % and all others subject to Law 22 and its modifications use framework agreements. achievement) By 2014, the medium term debt management strategy is published and revised Indicator 6 : annually and corresponding debt evaluation reports compare the evolution of risk indicators with the targets in the strategy Value No formal debt Debt management Medium term debt (quantitative or management strategy strategy must be management strategy Qualitative) exist published has been published Date achieved 12/31/ /31/ /31/2014 Achieved. The Debt Strategy ( ) is consistent with the country s Comments macroeconomic framework, is revised annually, and is available online. (incl. % Corresponding debt evaluation reports assess risk indicators and are also prepared achievement) regularly. Indicator 7 : By 2014 the revised proxy means test (PMT) is in use to select all households that enter in the Red de Oportunidades CCT program Value (quantitative or Qualitative) 0 percent Proxy means testing has been revised Proxy means testing has been revised and is in use. Date achieved 12/31/ /31/ /31/2014 Comments (incl. % achievement) Achieved. Proxy means testing is used to determine eligibility of households that enter the CCT program. Moreover, the proxy means methodology has been updated to further improve the targeting of Red de Oportunidades. ix

11 Indicator 8 : By 2014 increased ability of MIDES to conduct recertification of beneficiaries of 100 a los 70 through the regulation of Law 86 and the recertification strategy MIDES has conducted Value Ability to conduct No technical tools recertification of (quantitative or recertification has beneficiaries of the Qualitative) increased 100 a los 70 program. Date achieved 12/31/ /31/ /31/2014 Comments (incl. % achievement) Achieved. MIDES strengthened its operational and technical capacity to target social programs, especially 100 a los 70 (now 120 a los 65). A Social Vulnerability Survey is now in place, along with a revised legal framework to verify eligibility. By 2014 MIDES has issued quarterly reports based on the single registry assessing Indicator 9 : the coverage and efficiency of social programs, including individual duplications at household level. Value Quarterly reports Bi-monthly reports (quantitative or No report issued issued Qualitative) Date achieved 12/31/ /31/ /31/2014 Comments (incl. % achievement) Achieved. The target was exceeded as MIDES issues regular bi-monthly reports. Also, MIDES conducted audits of social programs including Red de Oportunidades to improve their coverage and targeting, and reduce fiscal leakages. Indicator 10 : Percentage of children from the poorest quintile who receive Beca Universal Value (quantitative or 0 percent 70 percent 100 percent Qualitative) Date achieved 12/31/ /31/ /31/2014 Comments (incl. % Achieved. The target was exceeded by 43 percent. achievement) Indicator 11 : The number of people with severe disabilities and in poverty or vulnerable condition covered by the Angel Guardian program reached 10,000 Value (quantitative or 0 persons 10,000 13,688 Qualitative) Date achieved 12/31/ /31/ /31/2015 Comments (incl. % Achieved. The target was exceeded by 34 percent. achievement) x

12 G. Ratings of Program Performance in ISRs Development Policy Loan P No. Date ISR Actual Disbursements DO IP Archived (USD millions) 1 07/31/2011 Satisfactory Satisfactory /11/2012 Satisfactory Satisfactory /11/2012 Moderately Satisfactory Satisfactory Second Programmatic Development Policy Loan P No. Date ISR Actual Disbursements DO IP Archived (USD millions) 1 07/08/2013 Satisfactory Satisfactory /12/2014 Satisfactory Satisfactory PA Third Programmatic Development Policy P Date ISR Actual Disbursements No. DO IP Archived (USD millions) 1 03/25/2014 Satisfactory Satisfactory 0.00 H. Restructuring (if any) On April 30, 2012 the DPL series was modified. The closing date for DPL1 was extended. And the series that was originally designed to consist of four operations was reduced to three operations. xi

13 1. Program Context, Development Objectives and Design 1. Over the past 15 years Panama s high economic growth accompanied by sound macroeconomic management and structural policies led to significant poverty reduction. Over the period Panama grew by 7.6 percent on average, outpacing the growth rate in Latin American and the Caribbean (LAC) of 3 percent. Robust growth was accompanied by relatively low inflation (3.6 percent during ), limited fiscal imbalances (-2.2 percent of GDP) and a low and sustainable stock of public debt (37 percent of GDP). While the current account deficit remained elevated (9.8 percent of GDP during ), it had been driven to a large extent by large public investment projects, including the expansion of the Panama Canal, and had been fully financed by inflows of foreign direct investment (FDI). High economic growth helped to reduce the poverty rate (measured using a US$4 per day poverty line) from 26.2 percent in 2008 to 18.7 percent in Growth was widely shared, with the income of the bottom 40 percent of the population growing faster than that of the national average. At the same time, Panama s continuous improvements in structural policies and infrastructure allowed the country to consolidate its position as the most competitive economy in Central America and second after Chile in LAC, according to the Global Competitiveness Report. 2. This Implementation Completion and Results Report (ICR) assesses the achievements of the expected results of the programmatic series of the Fiscal Management and Efficiency of Expenditures Development Policy Loans to the Republic of Panama. The Development Policy Loan (DPL) series aimed to support the Government of Panama to: (i) mobilize domestic tax revenue and increase tax transparency; (ii) modernize public procurement practices; (iii) improve the institutional arrangements for debt management; and (iv) expand social transfer programs and improve the capacity of institutions for targeting. The first operation (DPL1) of US$100 million was approved by the World Bank s Board of Directors on May 3, 2011 and disbursed upon loan effectiveness on April 26, The second operation (DPL2) of US$100 million was approved on March 26, 2013, and disbursed upon loan effectiveness on July 18, The third and last operation (DPL3) was approved on December 30, 2013, and disbursed upon loan effectiveness on March 19, DPL1 closed on June 30, 2012; DPL2 closed on June 30, 2014; and the last operation in the series closed on January 30, Context at Appraisal 3. The programmatic series was part of the Bank s strategic engagement with Panama, designed to support the reform program during the term of President Martinelli. 3 Following the elections of 2009, the administration published its five-year Strategic Plan, which aimed at improving economic efficiency, enhancing competitiveness, and protecting the poor and vulnerable. The DPL series was designed to support specific priorities of the Strategic Plan. 1 Due to delays in the internal approval process within the Government of Panama, the authorities requested the World Bank to extend the deadline for the first programmatic operation s effectiveness and its closing date in order to allow sufficient time for loan effectiveness and disbursement. To that end, in April 2012 the effectiveness deadline and closing date for DPL1 were set to June 30, The DPL series was initially designed to consist of four operations but was shortened to three at the time when the second operation was prepared. The envisaged timeframe for the series spanned the period from 2010 to The adjustment to three operations results from the time that elapsed between the preparation of DPL1 and the Government request for DPL2, and as a result it was not possible to fit four operations within that time span. 3 President Ricardo Martinelli was sworn-in for a five-year term on July 1,

14 4. Panama s macroeconomic performance has been strong throughout the DPL series. Annex 1 provides selected economic indicators for the period At the inception of the DPL series, Panama s economy grew robustly following the global financial crisis, with GDP growth accelerating to 5.8 percent in 2010 from 1.6 percent in Growth was driven predominantly by the expansion of the services sector as well as a rebound in industry, on the back of strong growth in construction activity supported by an ambitious public investment program. High GDP growth was accompanied by a moderate increase in the inflation rate, a widening of the current account deficit, and a small deterioration in the government s fiscal balance, reflecting temporary conditions related either to global developments (as in the case of the inflation rate with rising oil prices) or the Government s policy objectives (increase in public investment). 5 Overall, a robust economic activity, supported by large FDI inflows and the adherence to the Social and Fiscal Responsibility Law (SFRL) added credibility to the country s solid macroeconomic framework. 5. By the time the second and third operations were appraised in early- and late-2013, respectively, Panama continued to have a sound macroeconomic framework, with economic growth gradually transitioning towards its medium-term potential. Growth in 2011 and 2012 reached 11.8 percent and 9.2 percent, respectively, continuing to be supported by the services and construction sectors; and boosted by increases in domestic credit, exports, and FDI. In 2013, given the completion of major investment projects and the impact of other external factors 6, GDP growth began to transition towards its medium-term potential of around 6 percent. On the external side, the increase in capital imports related to public investment widened the current account deficit, which reached 9.8 percent of GDP in 2013, yet it was largely financed by FDI. On the fiscal front, the increased spending both on capital investment and social programs led to a moderate rise in the fiscal deficit from 1.8 percent of GDP in 2010 to 2.3 percent of GDP in To accommodate a higher deficit ceiling, the Government amended the SFRL. Nonetheless, the public debt-to-gdp ratio remained relatively low and sustainable thanks to the robust economic growth. 6. To improve equity among the poor and given the strong macroeconomic performance of the country during the DPL period, the Government quickly advanced the structural reforms embedded in its Strategic Plan. After delivering key election promises (increasing the minimum wage; establishing the 100 a los 70 social program to support low-income elderly citizens, and advancing on the Panama City metro line), the Government put a lot of emphasis on reforms aimed at creating fiscal space in order to expand social programs. In particular, Congress approved a tax reform aimed at closing existing regulatory loopholes, widening the tax base, and improving tax administration. Moreover, in response to Panama s inclusion in the OECD s grey list of countries with inadequate international tax transparency frameworks, in April 2009 the Government expanded the network of treaties on double taxation. Later on, the Government continued the reform process by adopting a custody regime for bearer 4 All ratios to GDP are presented with base year In 2010, the authorities initiated the process of revising the methodology for GDP calculation. The revision included changing the base year from 1996 to 2007 as well as updating the calculation methodology in line with the standards set out in the new 2008 System of National Accounts. 5 First, the inflation rate accelerated to 3.5 percent in 2010 from 2.4 percent in 2009 as a result of the increase in international food and oil prices. Second, the current account deficit widened to around 9.6 percent of GDP in 2010 from 0.6 percent in 2009, as investment-related imports surged reflecting the expansion of the Panama Canal and the acceleration in other investment projects. Third, the deficit of the non-financial public sector increased from 1 percent of GDP in 2010 to around 1.8 percent of GDP in 2011 as a result of the increased public investment outlays. 6 For example, a temporary rerouting of some vessels away from the Panama Canal, or the slowdown in economic activity in the Colon Free Zone, triggered by the imposition of tariffs by Colombia for re-exports of Chinese textiles and footwear, and liquidity problems from Venezuela-based clients. 2

15 shares 7 certificates, to improve the identification process of beneficial ownership. In addition, the Government amended the public procurement framework to allow for more efficient use of resources, and strengthened the institutional capacity of the Public Credit Directorate (now Public Financing, DFP). In the area of social protection, reforms focused on improving the coverage and targeting of recently-created social assistance programs (e.g., 100 a los 70), and creating new programs, including Beca Universal (Universal Scholarship) to increase school enrollment and participation, and Ángel Guardián to support poor people with severe disabilities. 7. The DPL series was fully consistent with the World Bank s objectives of reducing poverty and boosting shared prosperity and supported the World Bank Group s Country Partnership Strategy (CPS) for The design of the series was built on lessons learned from previous DPLs in Panama and other engagements with upper middle income countries. The Government s strong ownership of the reform agenda and the alignment of the DPL objectives with the goals set in the fiveyear Strategic Plan were key factors influencing program implementation. The DPL supported two of the three pillars of the CPS, namely Enhanced Public Sector Transparency and Efficiency and Greater Opportunities for All. The country s high capacity and specific challenges across different areas resulted in a fairly broad sectoral coverage of the DPL series. 1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) 8. The original PDO specified in DPL1 was to support the Panamanian Government in creating fiscal space, strengthening fiscal management and transparency, improving the efficiency of public spending and strengthening social programs. The DPL series supported the Government s reform program under four core pillars: (i) Improving Tax administration and Tax Information Sharing; (ii) Strengthening Procurement Practices and Transparency; (iii) Strengthening Debt Management; and (iv) Expanding and Strengthening Social Transfer Programs. 9. The Key Results Indicators, as presented in DPL1, were the following: Tax Reform: Improving Tax Administration and Tax Information Sharing 1. Central Government tax revenue as share of GDP increases to 12.8 percent in 2011 (baseline: 2009=10.7 percent). 2. Number of cases resolved by the Administrative Tax Tribunal (baseline: 2009=0; target: 2011=36). 3. Tax information is shared with two countries (baseline: 2009=0; target=2). Strengthening Procurement Practices and Transparency 4. The number of items (of goods commonly purchased by Government agencies) covered by framework agreements has increased by at least 90 percent (baseline: 2009=2,452; target: 2011=4,756). Strengthening Debt Management 5. Bonds placed in the domestic market increase as a share of financing needs (baseline: 2009=0 percent; target 2011=at least 10 percent). Expanding and Strengthening Social Transfer Programs 6. The number of households covered by the Red de Oportunidades CCT program increases by 5 7 A bearer share is an equity security owned by whoever holds the physical stock certificate. The issuing firm neither registers the owner of the stock nor tracks transfers of ownership. This impedes determining the beneficial ownership of the security and therefore promotes secrecy within the financial system. 3

16 percent (baseline: 2010=72,000 households; target: 2011=75,260 households). 7. Percentage of beneficiaries of 100 a los 70 for whom compliance with health co-responsibility determines payment (baseline: 2010=0; target: 2011=10) 8. The Beca Universal scholarship program covers all children in public schools in grades 7-12 (baseline: 2010=291,000 children; target: 2011=466,000 children). 1.3 Revised PDO and Key Indicators, and Reasons/Justification 10. Over the course of the DPL series, the PDO did not change but the wording was adjusted to make it more specific and better aligned with the pillars of the operation. Furthermore, the program was broadened to include new reforms aimed at improving the capacity of institutions for targeting social transfers. As a consequence, the wording of the four objectives of the series and the results indicators were adjusted in order to enhance the linkages between them, and to ensure that the results indicators were directly attributable to the actions supported under the program. 11. The PDO of the DPL series was as follows: Support the Government of Panama in (i) Mobilizing domestic tax revenue and increasing tax transparency; (ii) Modernizing public procurement practices; (iii) Improving the institutional arrangements for debt management; and, (iv) Expanding social transfer programs and improving the capacity of institutions for targeting. 12. The final Key Results Indicators expected to be achieved by the end of the DPL series were the following: Mobilizing Domestic Tax Revenue and Increasing Tax Transparency 1. Central government tax revenue as a share of GDP is at least 12 percent in 2014 (baseline: 2009=11 percent). 2. The ITBMS revenue increased by at least 1 percentage point of GDP (baseline: 2009=2.3 percent; target: 2014=3.3). 3. The LTU covers at least 55 percent of total tax revenue in 2014 (baseline: 2009=0 percent). 4. By 2014, Panama has signed 12 TIEAs and has exchanged information as requested (baseline: 2009=no TIEAs in place). Modernizing Public Procurement Practices 5. Central government agencies and all others subject to Law 22 and its modifications use framework agreements and the number of catalogue items procured under those framework agreements is increased (baseline: 2009=2,452; target: 2014=7,300). Improving the Institutional Arrangements for Debt Management 6. By 2014, the medium term debt management strategy is published and revised annually and corresponding debt evaluation reports compare the evolution of risk indicators with the targets in the strategy (baseline: 2009=no formal debt management strategy). Expanding Social Transfer Programs and Improving the Capacity of Institutions for Targeting 7. By 2014, the revised proxy means test is in use to select all households that enter in the Red de Oportunidades program (baseline: 2009=0 percent). 8. Increased ability of MIDES to conduct recertification of beneficiaries of 100 a los 70 through the regulation of Law 86 and the recertification strategy of 100 a los 70 in 2014 (baseline: 2009=no technical tools nor legal support to conduct recertification). 9. By 2014, MIDES has issued quarterly reports based on the single registry assessing the coverage and efficiency of social programs, including individual duplications at household level (baseline 2009=no report). 10. Percent of children from the poorest quintile who receive Beca Universal (baseline: 2009=0; target: 2014=70). 4

17 11. The number of people with severe disabilities and in poverty or vulnerable condition covered by the Ángel Guardián program reached 10,000 (baseline: 2009=0; target: 2014=10,000). 13. The modifications to the Results Framework of the DPL series responded to changes in the pace of the reforms and/or to the broadening of the reform program. In the case of the target for Indicator #1, it was revised to reflect the impact of external shocks that were expected to affect negatively tax revenue collection. During DPL2, Indicator #2 was modified and Indicator #3 was added in order to monitor in a more precise way the reforms introduced by Law 8 of 2010 that increased the sales tax rate and created a Large Taxpayers Unit. Indicators #4 and #5 related to tax transparency and public procurement, respectively, were broadened in their scope to reflect a faster pace of reform implementation in both areas. Indicator #6 on debt management was modified to better reflect the supported actions, and to link it with the methodology of the Bank s Debt Management and Performance Assessment Tool. Indicators #7 and #8 were modified to better reflect the increased capacity of the Government to improve the targeting of social transfer programs and to perform an adequate recertification process among its beneficiaries. Indicators #9 and #11 were added during DPL 3 as a result of an expanded program in the area of social protection. Finally, the target for Indicator #10 was made more ambitious to include all children in a situation of poverty and vulnerability. Annex 2 presents the reasons behind the adjustments to the results indicators and a Policy and Results Matrix is presented in Annex Original Policy Areas Supported by the Program (as approved): 1. Domestic Tax Revenue and Tax Transparency 14. Improving the efficiency of revenue mobilization and promoting the exchange of information related to international tax agreements were intended to generate additional resources for social spending and at the same time enhance the transparency of the tax system. The reforms supported under this objective were of particular importance given the country s narrow tax base, significant tax exemptions, challenges related to the monitoring of large taxpayers, limited exchange of tax information with other countries, and a lack of transparency in tax and financial matters resulting from the anonymity of holders of companies bearer shares. In this area, the DPL series supported a comprehensive tax reform that (i) widened the tax base; (ii) eliminated tax exemptions; (iii) created a Tax Tribunal to resolve disputes between taxpayers and the Tax Authority; (iv) established institutional arrangements to monitor compliance among large taxpayers; and (v) empowered the Tax Authority to obtain information regarding the ownership of bearer shares. In addition, the series supported the signing of Tax Information Exchange Agreements. 2. Public Procurement Practices 15. Reforms to public procurement practices aimed at increasing the efficiency of public spending. This was of particular relevance given that the Government faced the twin challenges of high transaction costs and intensive administrative efforts when buying goods and contracting services. In this area, the DPL series supported (i) the introduction of the e-procurement platform PanamaCompra; (ii) the development and publication of Procurement Framework Agreements aimed at generating savings in terms of time, price, and transaction costs; and (iii) regulatory measures to improve the processing of high-value and complex procurement contracts. 3. Institutional Arrangements for Debt Management 16. Improving the institutional arrangements for debt management also aimed to support increased spending efficiency and fiscal sustainability more generally. At the time when the DPL series was designed Panama lacked a debt management strategy that evaluated borrowing costs and as a 5

18 result the country was not able to smooth its debt profile, hindering fiscal policy. The DPL series supported the development and publication of the first debt management strategy, which established targets for selected financial risk indicators and includes an assessment of cost-risk tradeoffs under different scenarios. Furthermore, the series supported (i) the issuance of Treasury Notes and the establishment of a primary dealers program, thereby expanding the domestic debt market; (ii) the reorganization of the Debt Management Office to bring it in line with international best practices; (iii) the preparation and publication of public debt evaluation reports that assessed market risks; and (iv) the modification of contracts with international credit risk agencies so that Panama s sovereign bonds could be rated. 4. Social Transfer Programs and Capacity of Institutions for Targeting. 17. Expanding the coverage and improving the targeting of social transfer programs aimed to support social inclusion by assisting and protecting the most vulnerable segments of society. In this area the series supported a comprehensive set of reforms. First, the series supported the expansion of the coverage of the CCT program Red de Oportunidades that started in Second, the series supported the creation of new social transfer programs, including (i) the non-contributory old age pension program 100 a los 70; (ii) the cash-transfer program to children for school grade achievements called Beca Universal; and (iii) the program Ángel Guardián, which provides social assistance to people with severe disabilities that live in poverty or are considered to be in vulnerable condition. And third, the series supported regulatory measures to improve targeting mechanisms for social transfer programs through (i) the use of proxy-means tests; (ii) the harmonization of information; and (iii) the recertification of beneficiaries. 1.5 Revised Policy Areas (if applicable) 18. The policy areas remained unchanged throughout the program. 1.6 Other significant changes 19. Initially, the DPL series was designed to consist of four operations but during the preparation of DPL2 the series was shortened to three operations. This adjustment resulted from the need to align the DPL series with the Country Partnership Strategy period. 2. Key Factors Affecting Implementation and Outcomes 2.1 Program Performance The programmatic series consisted of three single-tranche Development Policy Loans disbursed upon effectiveness, in the total amount of US$400 million. Table 2 provides key milestone dates for the DPL series. All prior actions were completed prior to the approval of the operations (see Annex 4). 8 This ICR takes into account the Implementation Supervision Reports (ISRs) that were filed for DPL1 (3), DPL2 (3), and DPL3 (1). The last ISR for DPL1 had a rating for the progress towards achievement of PDO of Moderately Satisfactory given that five out of eight outcome indicators had been achieved at the time, while three indicators had not been fully met. However, the ISRs for DPL2 and DPL3 noted an overall satisfactory assessment for the Progress towards the achievement of the PDO. 6

19 Table 2. Key Dates of the DPL series Operation Approval Effectiveness Disbursed Amount Closing Date DPL1 05/03/ /26/2012 US$100m 06/30/2012 DPL2 03/26/ /18/2013 US$100m 06/30/2014 DPL3 12/30/ /19/2014 US$200m 01/30/ During the preparation of DPL2, the program remained strong, and some prior actions were adjusted relative to what was originally envisioned under DPL1, as enabled by the DPF instrument under programmatic series. Out of a set of seven indicative triggers under DPL1, five were converted into prior actions under DPL2 with slight changes in their formulations, one was modified to account for actions that needed to be done prior to the proposed trigger in DPL1, and one was substituted with a stronger prior action. The trigger that was modified was related to the recertification of beneficiaries of the 100 a los 70 program, and it was adapted to support regulatory measures that were pre-requisites to carry out the recertification. Similarly, the indicative trigger that was substituted was related to the analysis of tax expenditures and its subsequent inclusion into the budget. However, this analysis took longer than expected, and therefore, it was not included as a prior action under DPL2. The alternative prior action supported the creation of the Large Taxpayers Unit (LTU). Overall, the Government program remained solid, and the Government was on track to meet the medium term result indicators as redesigned during the preparation of DPL During the preparation of DPL3, an accidental fire destroyed the offices of the General Directorate of Public Procurement creating significant administrative constraints. As a result the indicative triggers for Pillar 2 could not be converted into prior actions due to administrative delays. Nonetheless, the scope of Pillar 4 was broadened, reflecting an overall stronger program. Progress in the reform agenda on public procurement was slower than expected as the authorities diverted their attention to the reconstruction of the offices of the Generate Directorate of Public Procurement (Dirección General de Contrataciones Públicas, DGCP). While no prior actions were included in this area, the Government continued to make progress in the reform agenda to align the regulatory framework for public procurement closer to international standards. Furthermore, a new prior action in the area of social protection was included, which supported the creation of Ángel Guardián. This additional prior action, reflected the Government s commitment to promote equity and improve the living standards of the poor. 2.2 Major Factors Affecting Implementation 23. The overall implementation of the program supported by the DPL series was adequate, though there were factors that affected the pace of program implementation. Exogenous macroeconomic shocks and institutional aspects impacted the reform program. However, there were also factors that positively affected the implementation of the program. In particular, (i) there was a strong government ownership of the reform agenda that allowed for faster than expected advances in the social protection area; (ii) the program benefited from solid analytical underpinnings, complementary Bank investment lending, and technical assistance that supported DPL objectives; and (iii) there was a close collaboration with other development partners which helped to advance the reform agenda. 24. While Panama maintained an adequate macroeconomic framework throughout the DPL series exogenous shocks affected the implementation of the reform program. Panama s macroeconomic framework has been underpinned by prudent policies, the highest growth rates in LAC, low inflation, a low risk of external debt distress, and a current account deficit financed by FDI. Indeed, the growth rates significantly exceeded those expected at the time the DPL series was designed. However, 7

20 as further described in Section 3.2, exogenous macroeconomic factors affected tax revenue targets, particularly taxes on imports and consumption related to imports. 25. The institutional capacity of the Government to undertake the reforms under Pillar 1 was affected by two consecutive changes in the structure of the Tax Authority. In April 2013, in an attempt to vest the Tax Authority with financial and operational autonomy, the DGI, which operated inside MEF, was replaced by the autonomous ANIP (Autoridad Nacional de Ingresos Públicos). However, in July 2014 the Panamanian Supreme Court declared this change unconstitutional, ANIP was closed, and the authority went back to the original DGI structure. As noted in Section 3.2, this reorganization process temporarily affected the ability of the tax authority to apply and enforce new tax provisions. Nonetheless, the Government remained committed to the reform agenda and tax collection later regained an upward trend. Another issue that affected program implementation, as noted earlier, was the accidental burning of the offices of the DGCP that took place in May This unforeseeable event diverted the focus of the Government towards the reconstruction of the offices and as a result no prior actions were included in this area. Nevertheless, the authorties kept the reform program on track and implemented Framework Agreements within their procurement systems. 26. Program implementation benefited from sound analytical underpinnings and complementary Bank investment lending and technical assistance across all pillars of the DPL series (see Section 3.4b). First, economic and sector work by the Bank and other development partners helped inform the reform agenda and supported a fruitful policy dialogue with the Government and key stakeholders (see Annex 5). Second, complementary Bank projects e.g., the Public Sector Efficiency Technical Assistance Loan (P121492), the Social Protection Project (P098328), and the Health Equity and Performance Improvement Project (P106445) helped to advance program implementation Program implementation also benefited from close collaboration with the Inter-American Development Bank (IADB) and from Government consultations with stakeholders. The Bank and the IADB undertook joint analytical work that underpinned the DPL program and provided parallel financing through Policy-Based Loans in 2012 and 2013 that supported complementary reforms on fiscal management and financial sector oversight and regulation. In addition, the Panamanian Government, through its Council for National Development Concertation (Consejo para la Concertación Nacional para el Desarrollo), held consultations with the private sector and the civil society aimed at fostering broad consensus on selected reforms supported by the program. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 28. The program development objectives (PDO) of the DPL series were narrowly-defined, directly supported by the prior actions, reflected well the results envisaged, and were aligned with the Government s Strategic Plan priorities. Moreover, the M&E framework captured key 9 For example, after the burning of the offices of DGCP, the Bank supported the rental, refurbishment, and equipment of the new DGCP offices through the Public Sector Efficiency Technical Assistance Loan. Finally, technical assistance by the Bank and other partners also supported program implementation across the four objectives of the DPL series. For example, in the area of social protection, the design and implementation of the programs 100 a los 70 and Ángel Guardián were informed by a survey on Disability and Poverty conducted by the Bank in 2009 as part of a Poverty Assessment. Similarly, Bank technical assistance supported program implementation in tax administration, tax transparency, and debt management, including support to develop the first medium-term debt management strategy. 8

21 dimensions of institutional change, and the Bank complemented the supervision of the DPLs with a series of activities aimed at understanding the drivers of institutional change (see Section 3). Furthermore, the M&E framework benefited from a candid assessment included in the program documents of governance challenges and institutional capacity weaknesses that could affect the pace of the DPL program implementation. (a) Design 29. The M&E framework was prepared jointly with the government counterparts, supporting the process of institutionalizing M&E arrangements in the public sector. Under DPL1, the results framework comprised 8 results indicators. Under DPL2 and DPL3, the framework was broadened to include a total of 11 indicators some indicators were adjusted, as discussed in Section The M&E framework established clear links between the PDOs, prior actions, and expected results. The DPL series chose the least number of indicators capturing key policy dimensions being assessed, in light of country needs and available data. Results indicators identified baseline and target values in line with the expected program results. Some targets were updated during the course of the series considering the pace of reform implementation. The indicators were largely based on publicallyavailable data, although some of them (e.g., coverage of large taxpayers) required an additional data collection effort on the part of the Government. Overall, the 11 indicators comprising the M&E framework were relatively easy to measure, aligned with the PDOs, and directly attributable to the prior actions, as summarized below: In the first objective of the DPL series, the indicators covered both the mobilization of domestic tax revenues (i.e., overall tax-to-gdp ratio, ITBMS-revenue-to-GDP ratio, and revenues from large taxpayers) as well as tax transparency (i.e., signing and implementation of TIEAs). In the second objective, the indicator covered a key dimension of the modernization of procurement practices (i.e., the use of framework agreements and their related number of catalogue items). In the third objective, the indicator covered key dimensions of institutional arrangements for debt management, as recommended by the Bank s Debt Management and Performance Assessment (DeMPA) tool (i.e., the regular preparation and publication of a medium-term debt management strategy and corresponding debt evaluation reports). Finally, in the fourth objective, the indicators covered both the expansion of social transfer programs (i.e., percentage of children from the poorest quintile who receive Beca Universal, and the number of people with severe liabilities and in poverty or vulnerable condition covered by the Ángel Guardián program) as well as the capacity of institutions for targeting (i.e., use of proxy means test in Red de Oportunidades, recertification of beneficiaries of 100 a los 70 program, and the issuance of quarterly reports on the coverage and efficiency of social programs). 31. Furthermore, the adjustments that were done to the original results indicators during DPL2 and DPL3 improved the M&E design. Relative to the originally-selected indicators, the final indicators (i) better reflected program efforts as they were directly attributable to the prior actions; and (ii) better captured key dimensions being assessed (see Annex 2). For instance, the replacement of the indicator on the number of cases resolved by the Tax Tribunal included in DPL1 for the indicator measuring the increase in ITBMS revenue (specified in DPL2 and DPL3) was adequate because the latter was directly attributable to the ITBMS prior action and it was better aligned with the objective of mobilizing domestic tax revenues. Similarly, the inclusion in DPL3 of the indicator related to the issuance of quarterly reports assessing the coverage and efficiency of social programs helped to monitor progress on the objective 9

22 improving the capacity of institutions for targeting, and it was directly attributable to the prior action supporting the Single Registry of Beneficiaries. 32. The M&E design was based on analytical underpinnings. For instance, the results indicators in the areas of tax mobilization and procurement were informed by a Public Expenditure Review, a Public Expenditure and Financial Accountability (PEFA) report, and analytical work on tax capacity and tax compliance in Panama (see Annex 5). The indicator on tax transparency was based on the OECD s Phase I Peer Review Report on Panama s regulatory framework for tax transparency. The indicator on debt was based on the DeMPA tool. And the indicators in the area of social protection were based on a Poverty Assessment and a Review of Social Assistance Programs in Panama. (b) Implementation 33. The Ministry of Economy and Finance (MEF) led M&E implementation and coordinated with all the involved agencies, including the Ministry for Social Development (MIDES) and the Ministry of Health (MINSA). Together with MEF and the National Institute of Statistics, these institutions collected the data necessary to assess and report on implementation progress and achievement of all results indicators. In addition to providing data on the results indicators, the Government provided additional information on the four DPL objectives, including details of ongoing reforms. Moreover, the collection of the majority of results indicators is likely to be sustained over time. Overall, the documentation received from the authorities for the preparation of this ICR was timely and complete, and the quality of the data was satisfactory. However, for one indicator (#3, related to the coverage of the Large Taxpayers Unit), the authorities noted that the methodology to calculate this indicator was different to the one used when the target was set under DPL2 (i.e., 55 percent). At the time this target was set, the Large Taxpayers Unit had just been created under ANIP. Given that ANIP was later replaced by DGI, the DGI authorities had to re-estimate the historical series for this indicator using a different methodology. Thus, for Indicator #3, the target value assessed in this ICR is not directly comparable to the target value originally specified in the DPL series (see Section 3.2). (c) Utilization 34. The DPL series supported the use of M&E arrangements. For instance, with the creation of the indicator on Beca Universal, the Government decided to include new questions on scholarship benefits into the 2013 household survey Encuesta de Propósitos Múltiples. Also, to reduce transaction costs for the authorities, the Bank and the IADB coordinated the monitoring of progress on the expansion of Red de Oportunidades. Regular monitoring and data collection activities undertaken as part of the DPL series facilitated discussions with the Government on the implementation of reforms and their results. For instance, with the preparation of the first medium-term debt management strategy, the series contributed to broadening the scope of the policy dialogue to cover issues of fiscal sustainability and fiscal rules this was important given the lack of independent monetary policy in Panama. Furthermore, the Bank complemented DPL supervision activities (discussed in Section 5.1b) with a number of technical assistance activities, including a review of tax capacity and tax compliance, an assessment of procurement practices, a Debt Management and Market Development Needs Assessment, and technical assistance to support the design, implementation, and evaluation of social transfer programs. These activities contributed to improving the understanding of institutional capacity issues across the four objectives of the series. 2.4 Expected Next Phase/Follow-up Operation 35. The World Bank continues to support the Government of Panama in the four areas of the DPL series through policy dialogue, analytical and advisory services, and lending operations. In 2015 the World Bank Group completed a Systematic Country Diagnostic and prepared a Country 10

23 Partnership Framework (CPF) for (Report No ). As part of the CPF, the Government of Panama requested a new programmatic DPL series that builds on progress achieved under the previous series. The new Shared Prosperity DPL series aims at improving fiscal management, social inclusion, and service delivery in the energy and water sectors; supporting specific objectives of the Government s Economic and Social Strategy In April 2015 the World Bank s Board of Directors approved the First Shared Prosperity DPL (P151804), designed as the first in a series of three operations. The Bank is currently preparing the Second Shared Prosperity DPL (P154819), which is scheduled to be discussed by the World Bank s Board of Directors in September The Second Shared Prosperity DPL continues to support the reform agenda to improve fiscal management, inclusion, and service delivery, but its scope has been enhanced to support reforms in the areas of international tax transparency and financial integrity. In a similar vein, the Bank continues to support the objectives of the previous series through investment lending in the areas of public financial management and social protection. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation (a) Relevance of Objectives: Substantial/Satisfactory 36. The objectives of the DPL series were and remain highly relevant to the country conditions. The PDO mobilizing tax revenues and increasing tax transparency; modernizing public procurement practices; improving the institutional arrangements for debt management; and expanding and improving the targeting of social transfer programs are just as relevant today as the time when the DPL series was designed, as it was confirmed by the Bank s Systematic Country Diagnostic for Panama undertaken in The development challenges that Panama faced when the operation was designed were difficult, and addressing them will require efforts over the long-term by successive governments. Indeed, Panama continues to have relatively low levels of tax revenues. And given the lack of independent monetary policy in the country, improving the efficiency of expenditures by modernizing procurement, debt management, and social protection systems remains essential to promote economic growth and reduce poverty. In this vein, the supported tax reforms intended to expand the tax base and improve tax collection, while reforms in the areas of procurement and debt management intended to generate fiscal savings. Meanwhile, improving tax transparency was highly relevant for Panama, given the fact that significant deficiencies had been identified in this area. Furthermore, reforms intended to improve the coverage of social transfers (Beca Universal, 100 a los 70, and Ángel Guardián), combined with measures to improve targeting, were also highly relevant as they intended to direct resources towards the most vulnerable, while at the same time reducing fiscal leakages, ultimately feeding into the Government s goal of reducing poverty and inequality. (b) Relevance of Design: Substantial/Satisfactory 37. The objectives of the DPL series aimed to address long-standing institutional challenges in Panama and were closely linked with specific priorities of the Government s Strategic Plan. Program design was informed by lessons learned from previous DPLs in Panama, and the Bank selected areas in which it was able to contribute and collaborate. In particular, the Bank and the authorities were aware that improving tax collection and information-sharing; procurement practices; debt management systems; and social protection mechanisms were long-term processes that required sustained political support from consecutive governments. Furthermore, considering the initial conditions of the country (level of development, institutional capacity, and political economy environment), the objectives were designed to target specific policy dimensions, as described next. The programmatic design allowed for the adoption of legislations in DPL1 and implementing regulations in DPL2 and DPL3. This approach was helpful in avoiding implementation slippages. Overall, the DPL series supported a strong program of 11

24 reforms in critical areas, and contained selected result indicators that were directly attributable to the prior actions and were a good measure of the objectives set, given the needs of the country and the availability of data. Objective 1 (mobilizing domestic tax revenue and increasing tax transparency) was designed to cover aspects related to tax administration and exchange of tax information with other jurisdictions. The selected results indicators were a good measure of this objective and stated in the Government s Strategic Plan. Moreover, they were aligned and relevant to the Panama context and data constraints. The reform program was strong and supported legislations and implementing regulations (e.g., tax rate increases, elimination of tax exemptions, signing of Tax Cooperation and Exchange of Information Agreements, and the adoption of a custody regime for bearer shares), as well as institutional measures (e.g., establishment of a Tax Tribunal, a Large Taxpayers Unit, and a Sub- Directorate of Exchange of Tax Information) aimed at mobilizing domestic tax revenues and increase tax transparency. Also, during program implementation, some indicators were refined as noted in Annex 2 to better capture progress along the dimensions of the objective (e.g., ITBMS and tax transparency indicators). Objective 2 (modernizing public procurement practices) and Objective 3 (improving the institutional arrangements for debt management) covered targeted policy and institutional measures. The prior actions addressed specific challenges specified in the Government s Strategic Plan (e.g. lack of an electronic procurement registry; lack of a medium-term debt strategy). Similar to Objective 1, the results indicators for Objectives 2 and 3 (i.e., application of procurement framework agreements, and availability of a debt strategy) intended to assess the achievement of the established objectives, were directly attributable to the prior actions, and were linked to Panama s development challenges. Objective 4 (expanding social transfer programs and improving the capacity of institutions for targeting) covered two existing social programs (Red de Oportunidades and 100 a los 70), two new ones (Beca Universal and Ángel Guardián), and their targeting mechanisms. The program supported strong measures including the re-certification of beneficiaries, the expansion of coverage to poor households, and the use of a Single Registry of Beneficiaries. The results indicators (i.e., use of proxy means testing; adequacy of regulatory framework for recertification; assessments of coverage and efficiency of social programs; percentage of poor children covered by Beca Universal; and number of disabled people covered by Ángel Guardián) represented good measures of the objectives pursued. (c) Relevance of Implementation: Substantial/Satisfactory 38. Implementation arrangements were and remain relevant in the current context. MEF has been the executing agency given its central role in improving tax collection, tax transparency, public procurement, and debt management, and its coordination role on social policy in the country. MIDES continues to manage social programs, and coordinates with MINSA to provide health care services in poor areas. Within MEF, the Public Financing Directorate (PFD) was appropriately responsible for monitoring the implementation of the program. Indeed, the PFD remains in charge of monitoring operations with multilateral organizations. 3.2 Achievement of Program Development Objectives Objective 1: Mobilizing Domestic Tax Revenue and Increasing Tax Transparency Results Indicator #1: Central Government tax revenue as a share of GDP is at least 12 percent in 2014 (baseline: 2009=11 percent) Not Achieved 12

25 Results Indicator #2: ITBMS revenue increased by at least 1 percentage point of GDP (baseline: 2009=2.3 percent; target: 2014=3.3 percent) Partially Achieved Results Indicator #3: The LTU covers at least 55 percent of total tax revenue in 2014 (baseline: 2009=0 percent) Partially Achieved Results Indicator #4: By 2014, Panama has signed 12 TIEAs and has exchanged information as requested (baseline: 2009=no TIEAs in place) Partially Achieved 39. Reforms aimed at mobilizing domestic revenues and improving tax transparency achieved important results and the Government continued to implement reforms in this area after the closing of the DPL series. As noted earlier, a development challenge in Panama is the low level of tax revenues, which results from a narrow tax base, significant tax exemptions, and institutional challenges in tax administration. The DPL series aimed to address these weaknesses through a comprehensive agenda of reforms aimed at (i) widening the tax base and reducing exemptions (DPL1); (ii) strengthening tax administration through the establishment of a Tax Tribunal and better monitoring of large taxpayers (DPLs 1, 2, and 3); and (iii) promoting tax transparency through the exchange of information with other jurisdictions and the identification of the ownership of bearer shares (DPLs 1, 2, and 3). Overall, important results were achieved. Notably, tax revenues increased significantly in nominal terms during the DPL period (particularly revenues from sales taxes), the capacity of the tax authority to monitor compliance among large taxpayers improved, and tax transparency increased with the country exchanging tax information at request with other jurisdictions. Furthermore, after the closing of the DPL series, the new Administration continued supporting the PDO and implemented key reforms, including: (a) the organizational restructuring of DGI to advance efforts related to Tax Programing, Coercive Collections, and Tax Audits; (b) the implementation of a new sales tax withholding mechanism for credit/debit card transactions; and (c) the decision to sign the OECD s Multilateral Convention on Mutual Administrative Assistance in Tax Matters to exchange tax information with other 98 signing countries. These measures further improved tax collection and tax transparency. 40. While the Government took important steps in the right direction to mobilize domestic revenues, at the end of the DPL series in 2014, the overall tax-to-gdp ratio remained broadly stable relative to the baseline value in By 2014, Panama s tax-to-gdp ratio was 11 percent of GDP, falling 1 percentage point of GDP below the target value of 12 percent. 10 However, in nominal terms, tax collection increased significantly by around 76 percent from US$2,739 million in 2009 to US$4,829 million in 2014, and in 2011, the first year in which the tax reform was in full effect, tax revenues increased by 30 percent compared to The sales tax (ITBMS) reform was the major contributor to mobilize domestic tax revenues in Panama during the DPL period. Law 8 of 2010 increased the ITBMS rate from 5 to 7 percent, thereby widening the tax base; and eliminated ITBMS exemptions for air passenger transport, residential phone calls, and lubricants. As a result, ITBMS revenue increased by 0.8 percentage points, from a baseline of 2.3 percent of GDP in 2009 to 3.1 percent in The target value of 3.3 percent of GDP 10 At the onset of the DPL series, the base year for the GDP was In late 2013, the National Institute for Statistics and Census (INEC) revised the methodology for GDP calculation, changing the base year from 1996 to 2007 as well as updating the calculation methodology in line with the standards set out in the new 2008 System of National Accounts. For ease of comparison, this section of the ICR uses the same base year for the results indicators that was used at the time the DPL series was prepared (i.e. 1996). However, the Selected Economic Indicators table included in the annex uses the new 2007 base, as there has been no further publication of the GDP values in 1996 base. 13

26 was nearly achieved, falling slightly short by only 0.2 percentage points. It is important to highlight that the supported reforms led to a significant increase in the sales tax revenue in nominal terms. In 2011, the first year in which the ITBMS reform was in full effect, sales tax revenues increased by 36 percent relative to the previous year; and during the DPL period ( ) they increased by 143 percent, from US$557 million in 2009 to US$1,351 million in Five exogenous factors, out of the control of the program of reforms supported by the DPL series, help explain the shortfall in the tax revenue targets: First, the imposition of tariffs on imports (Panamanian re-exports) from the Colon Free Zone (CFZ) and liquidity problems for some CFZ clients had a negative impact on import tax revenues. In March 2013, Colombia imposed new tariffs on textiles and footwear which led to a contraction in economic activity in the CFZ. Moreover, a number of Venezuela-based companies failed to pay for their CFZ imports due to foreign currency restrictions in Venezuela. The combined result of these two shocks was a decline in imports of the CFZ of 13 percent in 2013 alone, and a decline in contributions from the CFZ from a peak of 0.25 percent of GDP in 2010 to 0.08 percent in Second, a temporary rerouting of shipping traffic through the Panama Canal led to a decline in economic activity in the Panama harbor during 2013 and This was reflected in a 0.7 percent of GDP decline in contributions from the Panama Canal, from 2.8 percent of GDP in 2010 to 2.1 percent in Third, during the course of the DPL series, Panama signed Free Trade Agreements with major trade partners including the United States, Canada, Mexico, and Peru which lowered or eliminated custom tariffs to imports from these countries, leading to a reduction in the taxable amount for the ITBMS. Notably, the implicit import tax rate declined significantly from an average of 2.3 percent in to an average of 1.3 percent in Fourth, since mid-2014 the fall in international oil prices Panama is a net importer of crude oil led to a reduction in fuel excise tax collection from 0.42 percent of GDP in 2009 to 0.27 percent in As oil imports are exonerated from import taxes in Panama, there was a direct pass-through effect of lower prices to industries like transportation, which also indirectly affected sales tax collection. The above-mentioned reduction in imports significantly affected tax collection from import tariffs and imports sales tax, by an estimate of 0.5 percentage points of GDP. Indeed, the shortfall in the achievement of the ITBMS target indicator is explained by the significant reduction in revenues from sales taxes on imports. The ICR team estimated that out of the 0.5 percentage point reduction in tax collection due to lower imports, 0.2 percentage points came from lower collection of sales tax on imports, which would have been enough to achieve the target for Indicator #2. Finally, the shortfall in the tax-to-gdp ratio is also explained by the pace of GDP growth. In 2009, when this indicator was defined, real GDP grew by 3.9 percent and it was expected to grow by 7.2 percent on average during However, actual growth was 1.5 percentage points higher at an average of 8.7 percent during that period. Higher-than-expected GDP growth affected the ratios of overall and ITBMS tax revenues with respect to GDP. It is also worth highlighting that the baseline ratios of 2009 were high relative to previous years: between 2005 and 2008 the average tax-to-gdp ratio had been around 10 percent, whereas the ITBMS-to-GDP ratio had been around 2.1 percent. 43. In addition to the aforementioned exogenous factors, Law 8 of 2010 changed the methodology for the calculation of anticipated income tax payments, which helps explain the pattern of income tax collection. To tackle tax evasion and tax avoidance, Law 8 introduced monthly anticipated payments for the income tax (based on a percentage of the previous month gross revenue) that were applied between January 2011 and July These anticipated payments generated a significant increase in tax collection during those years. However, managing this new payment method proved to be administratively costly for the Tax Authority. Hence, the authorities decided to return to the previous method to determine income tax liabilities. As a result, the Tax Authority was forced to reimburse 14

27 taxpayers for their anticipated payments, which led to a decrease in the tax collection for the following years, affecting the overall tax-to-gdp ratio. 44. Furthermore, as noted in Section 2.2, there were two institutional changes within the Tax Authority that temporarily affected the pace of the reform process. First, Law 24 of 2013 created the autonomous ANIP, which replaced the DGI that was operating within MEF. This reform aimed to modernize tax administration, by vesting ANIP with financial and operational autonomy. Under the new structure, activities that were previously done within DGI, like coercive collection, were outsourced, leading to the dismissal of an important amount of tax collection personnel. However, in July 2014 the Panamanian Supreme Court declared the law unconstitutional, and the authority went back to the original DGI structure within MEF. These changes disrupted the operations of the Tax Authority and required an organizational restructuring in order to recover DGI s full operational capacity. During this period there were significant changes in the staff composition, which affected the pace of reform implementation as well as tax collection efforts, as reported by the Tax Authority. 45. The Government persevered in its reform efforts to improve tax collection after the closing of the series, and it is expected to achieve the targets set in the DPL series in the medium term. In 2015, the authorities created the Department for Tax Programming to develop strategic plans to enhance their oversight efforts 38 staff members were added to the Coercive Collections Department and 56 to the Audits Department to improve supervision and a new tax filing system (e-tax version 2.0) was introduced to facilitate tax compliance. Moreover, in late-2015 a new tax withholding mechanism for the ITBMS tax was adopted and became fully operational in January For this reform, a new Department for Tax Withholding Agents Control was created within DGI. As a result of these reforms, in the first quarter of 2016, ITBMS revenues increased by 22 percent relative to 2015 more than compensating the 16 percent decrease in the ITBMS revenues from imports thus resulting in an increase in total ITBMS revenues by 6 percent. Overall the Government is expected to achieve the targets set in the DPL series in the medium term. In the first quarter of 2016, tax revenues grew by 38 percent relative to the same period in This marks a positive trend in revenue collection. Also, the positive trend in sales tax revenues will allow for the achievement of the target value of 3.3 percent of GDP in the medium-term, particularly taking into account that imports volumes for 2016 are expected to decrease by less than 1 percent, much lower than the 12.5 percent decrease in Regarding tax compliance among large taxpayers (Indicator #3), improvements to the organization structure and capacity of the Tax Authority to monitor large taxpayers contributed to mobilizing domestic tax revenues. The DPL series supported the creation in 2012 of the LTU within DGI. Following the creation of the LTU, the authorities identified 72 large taxpayers, and trained 10 tax auditors to carry out audits on large taxpayers. The authorities also introduced a new audit system that tracked compliance among large taxpayers against their declared tax liabilities. By 2013, the LTU had completed ten audits, and five in In 2014, following the closing of ANIP and the return of the DGI, the LTU was restructured, and its audit function was transferred to a new Department of Tax Audits. With the creation of this specialized audit department, the authorities increased the number of audits 11 In August 2015, the DGI created the Tax Withholding Agents Control Department, initiating a series of trainings to capacitate all related personal for the implementation of a new tax withholding scheme. In October 2015, Law Decrees 463 and 470 established as withholding agents (i) all companies with annual purchases of US$10 million or more, (ii) credit and debit cards administrators, and (iii) the Panamanian Government. These agents will now withhold 50 percent of the ITBMS billed in the case of the Government, it will withhold 50 percent of the ITBMS generated for all purchases of goods and services. The implementation of this mechanism includes the update of the Taxpayer s Unique Registry (RUC) for all withholding agents and the implementation of the mechanisms to perform all tax declarations and payments through the e-tax systems. 15

28 significantly, completing 91 audits in 2015 and 44 during the first 6 months of All in all, the monitoring of compliance among large taxpayers has been strengthened. By 2014, the LTU covered 31 percent of total income tax collection, from a baseline of zero in According to the Government, this indicator is appropriate to track the performance of the new LTU, as the primary focus of the LTU is to monitor income taxes. 47. The monitoring of compliance among large taxpayers continued to improve after the closing of the DPL series. In 2015, the Government completed a comprehensive report on tax compliance among 500 large taxpayers in the country. Also, since January 2016 transactions conducted using credit or debit cards in Panama undergo an automatic withholding of 1.5 percent of the transaction amount as an advance tax payment. Given this, the DGI established a new program that monitors compliance among withholding agents, the majority of which are large taxpayers. 48. Finally, regarding tax transparency (Indicator #4), strengthening the framework for international tax transparency has become a priority for the Panamanian Government. In 2010, the OECD s Global Forum on Transparency and Exchange of Information for Tax Purposes conducted its Phase 1 Peer Review Process to evaluate Panama s status of compliance with international standards of transparency and exchange of tax information. 12 This review highlighted shortcomings regarding the tax information exchange process that needed to be addressed in order to move forward to the Phase 2 of the review process. In this context, the DPL series supported the signing of Tax Information Exchange Agreements (TIEA) and the identification of the ownership of bearer shares. Prior to the series, Panama had a limited network for tax information exchange. The series thus supported the signing of double taxation agreements with ten countries, and the signing of a Tax Information Exchange Agreement (TIEA) with the United States. Panama then continued to expand the network of countries with which it can exchange tax information upon request. As of June 2016, nine countries 13 have signed TIEAs with Panama, one country (Germany) is in the process of signing a TIEA with Panama, while three countries (Australia, Japan, and India) are in advanced negotiations for similar agreements. Hence, at the time of writing of this ICR, the results indicator had been partly achieved with 9 TIEAs operational nonetheless, the number of TIEAs is expected to increase to 13 in the near future, surpassing the DPL target. 49. Panama has taken further positive steps to bring its transparency framework closer to international standards. Law 18 of 2015 (i) amended the Commercial Code to oblige all legal entities to keep updated share registries; and (ii) updated the 2013 bearer shares legislation by reducing the grace period for conversion of bearer shares to nominal shares or designation of a custodian, and prohibited banks from opening accounts to bearer shares companies. As a result of these measures, and the fact that Panama had expanded the network of countries to exchange tax information, in October 2015 the OECD s Global Forum accepted Panama into Phase 2 of the Peer Review process. 12 In September 2009, the OECD s Global Forum launched a formal process of peer review to monitor the progress made towards full and effective exchange of tax information. The peer review process evaluates jurisdictions compliance with the international standard of transparency and exchange of information on request. The Global Forum Terms of Reference break down the standard in ten essential elements, divided into three main parts: A availability of information, B access to information, C exchange of information. Peer reviews take place in two phases: Phase 1 reviews examine the legal and regulatory framework; and Phase 2 reviews assess the implementation of the framework in practice. A country that signs agreements with 12 countries (OECD or other countries) is considered to have substantially implemented the standard. 13 Canada, Denmark, Finland, Faroe Islands, Greenland, Island, Norway, Sweden and the United States. 16

29 50. Actions taken in 2016 further highlight the Government s commitment to improve tax transparency 14. In May 2016 Panama committed to adhering to the OECD Global Forum s Common Reporting Standards for Automatic Exchange of Financial Account Information in Tax Matters. This decision locks Panama into an institutional and policy reform process, which includes legislative, technical, and operational actions that are expected to result in the adherence to the Common Reporting Standards by Moreover, in July 2016 Panama decided to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, further advancing on the objectives supported by this DPL series. 51. Based on the results attained, the Achievement of Objective 1 is considered to be Modest. However, it is worth noting that exogenous factors outside of the control of the Government s policy efforts affected domestic tax mobilization efforts and prevented the achievement of the targets. This ICR notes efforts made by two successive governments to sustain the reform program. Also, there is an upward trend in tax revenue collection and the important steps that have been taken to mobilize domestic revenues and improve tax transparency, particularly when considering the initial conditions of the country, will allow the achievement of the DPL targets in the medium term. Objective 2. Modernizing Public Procurement Practices Results Indicator #5: Central government agencies and all others subject to Law 22 and its modifications use framework agreements and the number of catalogue items procured under those framework agreements is increased (baseline: 2009= ; target: 2014=7.300) Achieved 52. During the series, Panama significantly modernized its public procurement practices. The reform program focused on the introduction of the e-procurement platform PanamaCompra, the introduction and use of procurement framework agreements, and legal advances including the update of the regulatory framework to better handle complex, high-value contracts. In particular, the use of framework agreements by central government agencies aimed at helping the Government achieve savings in terms of time, price, and transaction costs. Notably, there has been a significant increase in the number of goods purchased through framework agreements, from 4,181 in 2009 to 11,801 in 2014, thereby exceeding the target by 62 percent. It is important to note that the target indicator was exceeded even though the pace of the procurement reform was hindered due to the destruction of the DGCP offices, as noted in Section 2.2. Furthermore, independent evaluations on Panama s public procurement practices highlight the modernization of procurement practices. For instance, the latest Public Management Evaluation Tool produced by the IADB in 2013 highlighted that Panama s index on the quality of public procurement improved from 2.6 to 3.0 (on a 0-5 scale). This evaluation also noted that Panama is one of four countries in LAC that extensively uses electronic purchasing and contracting systems, which promotes fiscal savings and more transparent transactions through the Internet. 53. After the DPL series, the Government continued modernizing its public procurement practices, particularly regarding the use of standard bidding documents and award criteria in bid evaluations. To enhance the transparency of the procurement system, the Government is harmonizing bidding procedures to avoid the amendment of existing standard bidding documents and the use of subjective award criteria. This is being done through a new Public Procurement Law. Moreover, the Bank 14 Recent events have highlighted the need to bring the framework for international tax transparency closer to accepted international standards and ensure the effective implementation of the recently-adopted AML/CFT legal regime. In April 2016, 11.5 million documents were leaked from a private legal firm based in Panama regarding operations through off-shore shell structures by over 200,000 entities from all over the world. 15 The baseline for 2009 has been updated to reflect the latest estimations by the Panamanian authorities. 17

30 and the IADB are working with the Government to evaluate the country s procurement system. This evaluation is being led by the authorities using a methodology developed by the OECD to assess aspects related to the procurement process, including: transparency; good management; prevention of misconduct; compliance; and monitoring and accountability mechanisms. The results of this evaluation are expected to be disclosed by end Based on the results achieved and the sustainability of the reform agenda, especially given the difficult circumstances resulting from the accidental burning of the DGCP offices, the Achievement of Objective 2 is considered to be Substantial. Objective 3. Improving the Institutional Arrangements for Debt Management Results Indicator #6: By 2014, the medium term debt management strategy is published and revised annually and corresponding debt evaluation reports compare the evolution of risk indicators with the targets in the strategy in 2014 (baseline: 2009=no formal debt management strategy) Achieved 55. A major challenge in Panama was the lack of a formal debt management strategy establishing target ranges for selected indicators of financial risk after assessing the cost-risk tradeoffs under different scenarios for market developments. In this area, the DPL series supported the preparation of the first medium-term debt management strategy, with the intention to increase spending efficiency and enhancing liquidity of the domestic debt market. In addition, the program supported the alignment of the organizational structure of the debt management office with international best practices, including the functions and responsibilities for each of its internal units to enable the formulation of a debt strategy. The series also supported the adoption of a plan for domestic debt market development. 56. The institutional arrangements for debt management improved substantially as a result of DPL program implementation. By end-2014 the Government had published its first medium term debt management strategy, which contained a thorough cost-risk analysis of alternative debt strategies under baseline and risk scenarios, taking into consideration market and macroeconomic constraints. The strategy guaranteed consistency of the debt management operations across time and increases transparency to all stakeholders. The debt strategy is set within the context of the government s macroeconomic assumptions and budget framework, is revised annually, and is available online. 16 Corresponding debt evaluation reports that assess the evolution of risk indicators are also being prepared and are updated on an annual basis. The debt strategy covers the period , and monitors six risk indicators: percentage of internal debt; percentage of debt maturing the following year; maturity profile of domestic debt; maturity profile for total debt; percentage of the debt issued with a fixed interest rate; and percentage of total debt in US dollars. At the time of writing of this ICR, all six risk indicators were within the ranges established in the debt strategy. Improved institutional arrangements for debt management have produced important results. For instance, borrowing costs in Panama have been significantly reduced The Government continued improving its debt management after the closing of the series. In 2016 it clarified operational and audit functions, by signing an agreement that transferred the responsibility for debt payment from the Comptroller s General Office to MEF, while the Comptroller retains its oversight and audit functions, in line with best international practices. As a result of this 16 Panama s debt strategy is available here: 17 According to official reports, average financing costs for Panama s public debt fell from 7.66 percent in 2005 to 4.38 percent in Interest payments on the Central Government s debt as a share of GDP fell from 2.7 percent in 2009 to 2.1 percent in Lower borrowing costs are attributable to better debt management practices and to the certification of Panama s Investment Grade since

31 agreement, for the first time MEF is able to make electronic debt payments. Furthermore, in 2016 the Government integrated its Debt Management and Financial Analysis System (SIGADE), the country s debt information system, with the country s Integrated Public Financial Management System (ISTMO). By linking SIGADE with ISTMO, Panama now has integrated budgetary and debt functions, and can service its debt electronically and record its transactions transparently and in real time. 58. Based on the results achieved and the sustainability of the reform agenda, the Achievement of Objective 3 is considered to be Substantial. Objective 4. Expanding Social Transfer Programs and Improving the Capacity of Institutions for Targeting Results Indicator #7. By 2014, the revised proxy means test is in use to select all households that enter in the Red de Oportunidades CCT program (baseline: 2009=0 percent) Achieved Results Indicator #8. Increased ability of MIDES to conduct recertification of beneficiaries of 100 a los 70 through the regulation of Law 86 and the recertification strategy of 100 a los 70 in 2014 (baseline: 2009=no technical tools nor legal support to conduct recertification) Achieved Results Indicator #9. By 2014, MIDES has issued quarterly reports based on the Single Registry of Beneficiaries assessing the coverage and efficiency of social programs, including individual duplications at household level (baseline: 2009=no report) Achieved Results Indicator #10. Percentage of children from the poorest quintile who receive Beca Universal (baseline: 2009=0; target: 2014=70 percent) Achieved Results Indicator #11. The number of people with severe disabilities and in poverty or vulnerable condition covered by the Angel Guardian program reached 10,000 (baseline: 2009=0; target: 2014=10,000) Achieved 59. Multiple legislative and organizational reforms have led to a substantial expansion of social transfer programs in Panama as well as a substantial improvement in the capacity of public institutions to target social programs to those that need them the most. In 2006, MIDES launched the flagship Red de Oportunidades (Opportunities Network) CCT program, aimed at providing income support to the extreme poor. In 2009, MIDES introduced a non-contributory pension system, the 100 a los 70 program, to support the elderly in poor and vulnerable conditions. In 2010, the Institute for Human Resources (IFARHU) established the Beca Universal program, a cash transfer program contingent on school attendance and minimum grade level. In 2012, MIDES introduced Ángel Guardián, a program to provide social assistance to extreme poor individuals with disabilities. As discussed below, the DPL series supported the expansion of the coverage of Red de Oportunidades and 100 a los 70, and the introduction of Beca Universal and Ángel Guardián, as well as measures to enhance targeting mechanisms. 60. CCTs have been an essential policy vehicle to reduce extreme poverty in Panama. Today, more than a third of all Panamanian households is supported by at least one of the afore-mentioned social programs and the impact of these programs on poverty reduction has been substantial. According to the Panama Systematic Country Diagnostic, more than half of the reduction in extreme poverty between 2007 and 2013 was associated with public transfers, and as of now Panama has nearly eradicated extreme 19

32 poverty (only 3.8 percent of the population live with less than US$ 1.90 a day). 18 Inequality has also been reduced during the DPL period. The Gini coefficient for Panama dropped from in 2009 to in In addition, poverty reduction in Panama has been accompanied by major improvements in other outcome indicators. For instance, during the DPL period, undernourishment has almost halved from 18.4 percent of the population in 2009 to 9.5 percent in The Government substantially improved the targeting of Red de Oportunidades through the use of proxy-means tests. For this program, the series supported a new targeting formula that enabled channeling resources to the poor in remote geographic areas. Participants are selected by estimating per capita family consumption using proxy means tests, adjusted for urban and rural areas. Targeting in the indigenous comarcas (the regions with high rates of extreme poverty) is purely geographical, meaning that all households in the selected comarcas are eligible for the program. This method reduces targeting costs. Currently the program covers 70,000 households, which receive US$50 per month in exchange for their children s school attendance and regular primary health care visits. 62. After the closing of the series, the Government continued to improve the targeting of Red de Oportunidades. In 2015, MIDES completed an audit of beneficiaries of the program, using the proxymeans testing, that led to the identification and exclusion of nearly 10,000 households (out of 70,000 households) that did not qualify for the assistance. In exchange, MIDES incorporated into the program a similar number of extreme poor families, mainly those living in indigenous comarcas, thereby reducing the extreme poor coverage gap in a fiscally-neutral manner. Furthermore, in 2015 the Government began using the banking system to pay out the benefits of Red de Oportunidades. Also, in 2016 a Social Development Directorate was created within MIDES to supervise all CCT programs and coordinate the selection, enrollment, and payment systems across different CCT schemes. 63. The Government improved the targeting of its 100 a los 70 program by establishing a more efficient operating framework to help the elderly living in poverty and vulnerable conditions; the coverage of the program has also been expanded and it is now called 120 a los 65. Law 86 of 2010, enacted one year after the creation of the 100 a los 70, established targeting criteria for this program. However, the inclusion of criteria to verify eligible beneficiaries, was still an aspect of the legal framework that required amending. To address this issue, in 2012 the series supported the adoption of a Social Vulnerability Survey and the design of a socioeconomic evaluation proxy-means test. These actions ensured that the legal framework had adequate grounds for determining eligibility for this program. Furthermore, in February 2013 Executive Decree 11 established re-certification procedures, coresponsibilities for program participants, and quality control processes (e.g., evaluation of social needs, complaints, and grievances). 19 Notably, in 2015 the Government further expanded the coverage of the 100 a los 70 program by increasing the benefit to US$120 per month to individuals over 65 years of age. 64. The development of the Single Registry of Beneficiaries improved the capacity of institutions for targeting social programs. The DPL series supported the development of a Single Registry of Beneficiaries (Registro Único de Beneficiarios) for Red de Oportunidades, 100 a los 70 (now 18 According to the World Bank twin goals, extreme poverty is considered to be eliminated when the poverty headcount rate at US$1.90 per day is lower than 3 percent. 19 To re-certify beneficiaries, a Consultancy Report was issued in 2014 aimed at strengthen the program s operational and technical capacity. The report specified mechanisms for a gradual recertification process across geographic areas (corregimientos), where low poverty rates and a high number of elderly covered by the program suggested potential errors of inclusion. This was complemented by an Administrative Consultancy Review that assessed the targeting process. These two initiatives helped to set up technical tools to improve the re-certification process. 20

33 120 a los 65), and Evaluación Social. 20 The Single Registry is operated within MIDES, and the authorities plan to include Ángel Guardián and Beca Universal into the registry. Importantly, since 2014 MIDES issues bi-monthly reports for the Red de Oportunidades program based on the Single Registry, therefore exceeding the target for Indicator #9 (i.e. quarterly reports). The reports, that among other things monitor participation across social programs, are an important tool to evaluate the performance of Red de Oportunidades. In addition, the Government is preparing a Framework Law for Social Programs which will mandate the use of the Single Registry for all CCT programs. 65. Beca Universal, aimed at helping families afford schooling costs, has helped to reduce dropout and repetition rates in public and private schools, and the coverage of the program has expanded. Introduced in 2010, Beca Universal transferred US$20 per month per child, conditioned on academic performance. The roll-out of the program to grade levels 1 to 6 was intended to help reach a high share of children from the poorest quintile of the population. Given that poorer households in Panama have more children and that the probability of them attending primary school rather than secondary school is higher, the roll-out of Beca Universal to younger pupils increased the program s potential impact on poverty reduction and equity. By 2012 the program reached full coverage from grades 1 to 12. As a result, secondary school enrollment spiked from 65.6 percent in 2011 to 77.8 percent in In addition, in 2013 individual based questions on scholarship benefits were included in the household survey Encuesta de Propósitos Múltiples, thereby enabling the evaluation of the impact of the program and the assessment of targeting efficiency. By 2014, the percentage of children from the poorest quintile receiving Beca Universal reached 100 percent from a baseline value of zero in 2009, thus exceeding by 70 percent the target value set in Indicator #10. Furthermore, the benefits of Beca Universal have increased and they are now differentiated by school level (primary, pre-secondary, and secondary cycles). Currently, the program provides cash benefits to over 600,000 students, of which primary students receive US$270 per child per year, pre-secondary students receive US$360, and secondary students receive US$450. Going forward, the Government s plan is to rigorously assess the impact of Beca Universal on the educational outcomes of Panamanian students. 66. Ángel Guardián, a social assistance program for people with severe disabilities who live in extreme poverty and vulnerable conditions, has also expanded. 22 Being the first of its kind in Central America, the program started in August 2013 paying a transfer of US$80 per month to 1,671 beneficiaries. The program aims at improving the living conditions of beneficiaries and reducing impoverishing effects upon their families. According to MIDES, by end-2015 the program supported 13,688 beneficiaries from a baseline value of zero, exceeding the target value specified in Indicator #11 (10,000) by 37 percent. Once the program is fully implemented it expects to cover 55,000 beneficiaries. 67. Based on the results achieved regarding the expansion of social transfer programs and the improved targeting capacity, as well as the sustainability of the reform agenda, the Achievement of Objective 4 is considered to be Substantial. 3.3 Justification of Overall Outcome Rating 20 The Bank s Panama Social Sector Expenditure and Institutional Review (July 2015) indicates that the creation of the Single Registry of Beneficiaries represents a critical step in improving the targeting of social programs and maximizing complementarities and impact across the programs. Further improvements to the Single Registry of Beneficiaries would ensure consistency of information across programs for better monitoring and evaluation. 21 Before the program was implemented, average secondary school enrollment had not exceeded 63 percent (from 2001 to 2009). 22 Vulnerable conditions as it is defined in the decree based on International Classification of Disabilities and Health. 21

34 Rating: Moderately Satisfactory 68. Relevance: The relevance of objectives, design, and implementation was substantial. The policy objectives and measures supported under the program, as well as its results indicators, were chosen on the basis of country priorities/conditions and availability of data. The DPL series tackled long-standing institutional challenges, supported an ambitious set of reforms, and focused on what was realistically achievable at the time. 69. Achievement of Objectives: The assessment is based on the 11 results indicators, the additional information provided on the achievement of each of the four objectives, and the efforts to ensure the sustainability of the reform agenda. Three of the four objectives of the DPL series modernizing procurement practices; improving the institutional arrangements for debt management; and expanding social transfer programs and improving the capacity of institutions for targeting were Substantially Achieved. For one objective mobilizing domestic tax revenues and improving tax transparency the achievement was Modest. Out of eleven results indicators, seven were achieved (in all cases exceeding expectations), three were partially achieved (shortly missing the targets), and only one was not achieved. Beyond the results indicators, the evidence shows that important steps were taken across all four objectives. 70. The rating of the achievement of development outcomes of the DPL series is Moderately Satisfactory. The overall assessment is on balance positive, because the reform program was significant and relevant, three out of the four objectives were substantially achieved, and none of the supported measures have been reversed. The main reason why it is rated Moderately Satisfactory is due to the fact that modest progress was achieved in mobilizing domestic revenues and improving tax transparency, albeit partly due to exogenous factors outside of the control of the authorities. 3.4 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 71. The DPL series is expected to have had positive effects on poverty reduction and social development via the expansion of social transfer programs, improvements in targeting, and sound macroeconomic management. Reforms in the areas of procurement and debt management aimed at increasing the efficiency of public spending and contributed to generating fiscal space to enhance social protection programs. Furthermore, reforms in the area of social policy significantly contributed to improve the welfare of poor and vulnerable groups, both through the expansion of programs and the better targeting of benefits to those that need them the most. As noted in Section 3.2, social transfer programs have been found to significantly reduce poverty and almost eliminating extreme poverty in Panama. (b) Institutional Change/Strengthening 72. The DPL series supported numerous efforts aimed at strengthening institutions across the pillars of the operation. Complementary analytical and advisory activities under the umbrella of DPL series had a direct impact on institutional change (see Annex 5). The main beneficiaries of these activities were MEF (and within this ministry, the DFP, the Tax Authority, and the General Directorate of Public Procurement), MIDES, MINSA, and IFAHRU. Examples of these activities include: (i) technical assistance to improve the framework for tax transparency to bring it closer to the standards recommended by the OECD s Global Forum; (ii) the Public Sector Efficiency Technical Assistance Loan that supported reforms in the areas of public financial management and procurement; (iii) advisory activities provided by the Bank s Treasury Department and a MIGA guarantee to improve public debt management and asset 22

35 management; and (iv) technical assistance supporting reform implementation in the area of social protection provided through the Social Protection Project and the Health Equity and Performance Improvement Project. As a result of these activities, Panama has (i) strengthened its institutional capacity to monitor tax compliance, particularly among large taxpayers; and (ii) improved procurement and debt management systems; (iii) developed a single information system to enhance the targeting, monitoring, and evaluation of social programs. (c) Other Unintended Outcomes and Impacts 73. Bank staff from various sectors emphasized that the operation led to a strengthened policy dialogue with the Government of Panama. No unintended negative effects were identified. 3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops There were no beneficiary survey and/or stakeholder workshop. 4. Assessment of Risk to Development Outcome Overall Rating: Moderate The risk of either policy reversals or not maintaining the outcomes in the areas supported by the DPL series is Moderate. 74. The risk of a deterioration in the macroeconomic outlook which would affect fiscal revenues, government spending priorities, and debt sustainability is moderate. Risks to the macroeconomic situation stem from external conditions and domestic factors. On the external side, global economic uncertainties could affect global trade flows and in turn, traffic through the Panama Canal. Likewise, low oil prices could incentive shipping vessels to take longer routes that avoid the Panama Canal. Given the centrality of the Canal for the economy and the fiscal balance, this risk could endanger the Government s program. However, even if these risks were to materialize, they would likely be offset by the positive impact on traffic expected from the expanded Canal (which opened in June 2016). Domestically, there are risks associated with fiscal performance, related to the lack of adherence to fiscal targets outlined in the SFRL. In addition, lower revenue collection might compromise the financing needs of the programs supported by the DPL series and reduce the country s ability to absorb domestic and external shocks. Finally, a delay in the implementation of the legal framework for improved financial and tax transparency could potentially undermine foreign investor confidence and constrain access to foreign capital. However, these risks are considered moderate given a number of mitigation measures, including: (i) progress achieved in reducing fiscal imbalances over the past two years and the political commitment of the new Administration to adhere to the deficit path laid out in the SFRL; (ii) fiscal consolidation measures, including through savings from reduced energy subsidies, as well as improvements in the public fiscal management; and (iii) the authorities commitment to adhering to CRS and the Automatic Exchange of Tax Information, and to signing the OECD s Multilateral tax information sharing convention, supported by technical assistance from the WB, IMF, OECD, and other partners. 75. Similarly, risks related to the institutional capacity for reform implementation in the area of procurement, debt management, and social programs, are also moderate. First, in the area of procurement reforms, the Government, through the e-procurement platform PanamaCompra, has introduced mandatory Framework Agreements for all Public Entities and the Central Government. As a result all public entities and the Central government agencies use framework agreements and the number of goods purchased through those framework agreements has considerably increased under the DPL series. Second, the Government remains committed to further advancements in the area of public debt 23

36 management, including as part of the follow-up DPF series and the Bank s technical assistance. Finally, in social policy, the Government has recently taken important measures to further increase the effectiveness of its key social protection programs, including: (i) measures to improve the targeting formula for Red de Oportunidades; (ii) new operating rules for 120 a los 65; and (iii) measures to harmonize data within the Single Registry of Beneficiaries. Going forward, further reform measures aimed at improving the coverage and targeting of social programs are in the pipeline, supported by technical assistance under the new DPF series. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 76. Bank performance during the identification and preparation of the operations was Satisfactory. Key strengths included: (i) strong Government ownership and collaboration between the Bank and Government teams at the stage of the design of the series areas supported were identified based on analytical work and on lessons learned from previous DPLs in Panama, and the priorities were jointly identified with the authorities and were highlighted in the CPS and in the country s five-year Strategic Plan; (ii) good coordination within the Bank s multi-sectoral team across the DPL thematic areas: macro-fiscal policy, procurement, debt management, and social policy; and (iii) a robust results framework, which established a clear path from PDO to prior actions to results indicators, as noted in Section 3.1. During the preparation of DPL2 and DPL3, some indicators were revised, broadened in scope, or added. For example, under DPL2 some prior actions differed from the set of indicative triggers identified at the time of DPL1, reflecting the varying speed of the reform implementation. Shortcomings in the course of the implementation of DPL series, such as the accidental burning of the office of the DGCP in 2013, did not detain the progress on the procurement modernization agenda, thanks to the Bank support through the Enhanced Public Sector Efficiency Technical Assistance Loan. Furthermore, the exogenous factors that affected tax mobilization efforts during the DPL series were unforeseeable and therefore mitigation initiatives could have not been put in place at the inception of the DPL series. Finally, the fact that the series was firmly anchored in the Government s Strategic Plan gave the authorities a strong ownership of the reform program, which helped to ensure the positive results of the DPL series and their future sustainability. (b) Quality of Supervision Ratings: Satisfactory 77. Bank performance in the supervision of the operation was satisfactory. Supervision of the operation was adequate. In addition to regular meetings held between Bank staff and the Government, the Bank conducted several supervision missions of the three operations, documented in ISRs as follows: DPL1 (June 2011, July 2011 and November 2012); DPL2 (July 2013 and February 2014); and DPL3 (March 2014). Mission reports and Aide-Memoires also complemented the preparation and supervision of the operations. An important aspect of managing the supervision of the operation had to do with the planning and timing of the missions. The first mission to advance in the preparation of DPL1 took place in December 2010, a few months before the approval of the first operation (May 2011) and the last one took place a month before the closing of the operation (January 2015). The Bank s team was fully engaged with the authorities during the implementation of reforms and discussed further reforms needed to consolidate progress on fiscal and debt management, procurement, and social policy. This dialogue was 24

37 supported by ongoing technical assistance activities and analytical work. Responsibility for data collection and action coordination was clearly defined and proceeded as intended. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 78. Given that both the Bank performance for quality at entry and quality of supervision are rated satisfactory, the overall Bank Performance is rated Satisfactory. 5.2 Borrower Performance Government Performance / Implementing Agency Performance / Overall Borrower Performance Rating: Moderately Satisfactory 79. For the purpose of this ICR, Government performance and Implementing Agency performance are considered the same. Therefore, the above rating should be viewed as an overall rating for the borrower. 80. Overall performance of the borrower has been rated as Moderately Satisfactory. MEF, through the DPF, coordinated with other ministries and agencies involved in the implementation of the DPL series, including MIDES, MINSA, and IFARHU. These institutions together with the National Institute of Statistics, collected the necessary data to assess implementation progress and reported to the Bank. The Government worked closely with the Bank team during the series, and the public entities mentioned above were attentive to the agreed actions and policies under each operation. MEF used the DPL series to strengthen inter-ministerial coordination, including the Tax Authority, DGCP, and DFP, as evidenced by the fact that the actions supported by the series were implemented as intended, and there was a substantial achievement of results along three of the four objectives of the series. Given the commitment on the part of the Government, the authorities had employed various mechanisms to reach agreement on reforms supported by the DPL series. Specifically, the National Development Council was helpful in connection with the decision making process on how to use additional public revenues; the private sector (Chamber of Commerce, Executive Enterprise Association of Panama and civil society) facilitated the implementation of the OECD Global Forum s recommendations on tax transparency; and the communication strategy created by the Government was effective in generating social consensus in the area of social protection. MEF worked in close collaboration with the government to implement the supported reforms and, overall, served as a reliable counterpart in the operation. Considering the challenges discussed in Section 3.2, the borrower s performance has been assessed as Moderately Satisfactory, in particular given the fact that further mitigation measures related to tax administration efforts would have helped to reduce some of the delays in reform implementation. Despite the fact that four of eleven results targets were not fully achieved, the Panamanian Government is projected to achieve these target values in the medium term. 6. Lessons Learned 81. Strong Government ownership of the reform agenda proved essential to ensure the implementation and sustainability of the DPL program. As noted in this ICR, the Government continued to support the PDO beyond the closing of the DPL series. One aspect that reflected this strong ownership and ensured that the reforms could be sustained were the consultations the Government undertook with different sectors to avoid resistance against the proposed reforms. Particularly two policy areas were supported by the consultations. First, regarding tax reform, the creation of the LTU and the 25

38 implementation of audits to track validation of compliance against declared tax liabilities; and second, the development of the Single Registry of the beneficiaries of three of the main cash transfer programs (Red de Oportunidades, 100 a los 70, and Evaluación Social), that enhanced the institutional capacity to better target their beneficiaries by improving the coordination among social protection programs. Given the relevance of objectives and the broad political support of the PDO, the new Government that took office in 2014 continued to support the PDO. 82. A simple design, based on lessons learned from previous operations in the country, supported an adequate pace of reform implementation. Instead of covering an extensive array of measures, the DPL series concentrated on four specific objectives that were aligned with the Government s five-year Strategic Plan. In these areas, the Bank worked closely with Government agencies that shared a strong ownership of the supported objectives. This operation prove to be a good example how DPLs can serve as a trigger to engage in more fundamental policy dialogue with a country. Dialogue between the Bank and the authorities during preparation and implementation of the program led to very specific technical questions where the Bank provided expertise. 83. Creditworthy middle income-countries benefit most from programs that permit adequate flexibility to account for rapid responses to changing circumstances, especially in the event of shocks. This was the case in Panama, when procurement-related actions needed to be adjusted in the event of unforeseen circumstances. 84. Strong analytical groundwork and complementary technical assistance proved to be essential to ensure adequate program implementation. Ideally DPLs should be based on previous technical assistance successes and salient cross-country experience. This Panama DPL series focused on areas of strategic relevance where the Bank had first established a record of strong technical capacity and had cross-country experience. Indeed, economic and sector work and technical assistance on macro-fiscal, public finance, social protection, and poverty issues helped to inform DPL measures and to ensure an adequate pace of reform implementation. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies 85. The ICR team would like to thank and acknowledge the Government of Panama for their remarks specified in Annex 7 of this ICR. The ICR team does not have any comments on the issues raised by the authorities. (b) Co-financiers Not applicable. (c) Other partners and stakeholders Not applicable. 26

39 Real sector Annex 1. Panama Key Macroeconomic Indicators Real GDP Per Capita Atlas GNI (In US$) 6,510 6,650 7,010 8,350 9,510 10,530 11,430 12,050 Contributions: Consumption Investment Net exports GDP deflator CPI (average) Fiscal Accounts Revenues and grants Of which: Taxes Direct Indirect Expenditures Overall balance Balance of Payments Current account balance Merchandise exports, f.o.b. (annual percentage change) Merchandise imports, f.o.b (annual percentage change) Foreign direct investment (millions of US$) 2,207 1,259 2,363 2,956 3,254 4,595 4,036 4,526 Gross reserves (months of imports) External public debt Terms of trade (annual percentage change) Memoranum items Annual percentage change, unless otherwise indicated Percent of GDP, unless otherwise indicated 1/ Percent of GDP, unless otherwise indicated GDP nominal in US$ billion Public sector debt (in percent of GDP) All ratios to GDP are presented with base year Source: Panamanian authorities, IMF staff estimates, and World Bank staff estimates 27

40 Annex 2. DPL1, DPL2 and DPL3 Results Indicators Reasons for Adjustments DPL1 Results Indicators DPL2 Results Indicators DPL3 Result Indicators Notes Objective 1. Mobilizing Domestic Tax Revenue and Increasing Tax Transparency Central Government tax revenue as share of GDP Central Government tax revenue as a share of GDP is at least 13 Central Government tax revenue as a share of GDP is at least 12 The target was revised under DPL3 because the tax revenue-toincreases to 12.8 % in 2011 percent in 2014 (baseline: percent in 2014 (baseline: GDP ratio was expected to be (baseline: 2009=10.7%). 2009=11 percent). 2009=11 percent). lower than initially projected, due to the occurrence of external shocks that affected revenue Number of cases resolved by the Administrative Tax Tribunal (baseline: 2009=0; target: 2011=36) ITBMS revenue increased by at least 1 percentage point of GDP (baseline: 2009=2.1 percent; target 2014=3.3). The LTU covers at least 55 percent of total tax revenue in 2014 (baseline: 2009=0 percent). ITBMS revenue increased by at least 1 percentage point of GDP (baseline: 2009=2.1 percent; target: 2014=3.3). The LTU covers at least 55 percent of total tax revenue in 2014 (baseline: 2009=0 percent). Tax information shared Panama has signed 12 tax By 2014, Panama has signed 12 with two countries information exchange tax information exchange (baseline: 2009=0; target: agreements and has exchanged agreements and has exchanged 2011=2) information as requested information as requested (baseline: 2009=no TIEAs in place). (baseline: 2009=no TIEAs in place Objective 2. Modernizing Public Procurement Practices The number of items (of Central government agencies Central government agencies goods commonly and all others subject to Law 22 and all others subject to Law 22 purchased by government use framework agreements and use framework agreements and agencies) covered by the number of catalogue items the number of catalogue items framework agreements has procured under those framework procured under those framework increased by at least 90 % agreements is increased agreements is increased (baseline: 2009=2,452; (baseline: 2009=2,452; target (baseline: 2009=2,452; target target: 2011=4,756) 2014=7,300). 2014=7,300). Objective 3. Improving the Institutional Arrangements for Debt Management Bonds placed in the domestic market increase as a share of financing needs (baseline: 2009=0 percent; target 2011=at least 10 percent). The medium-term debt management strategy is published and revised annually and corresponding debt evaluation reports compare the evolution of risk indicators with the targets in the strategy in 2014 (baseline: 2009=no formal debt management strategy in place). By 2014, the medium term debt management strategy is published and revised annually and corresponding debt evaluation reports compare the evolution of risk indicators with the targets in the strategy in 2014 (baseline: 2009=no formal debt management strategy). collection. This indicator was modified under DPL2 to monitor progress in the ITBMS, due to the enactment of Law 8 (2010), which widened the tax base and reduced tax exemptions. This indicator was considered to be more appropriate to measure progress in domestic revenue mobilization, and complemented Indicator #1. This indicator was added under DPL2 to monitor progress with regards to revenue collection among large taxpayers. When DPL1 was prepared there was no LTU in place. This indicator was revised to make it more specific and its scope was also broadened to capture progress with respect to the exchange of tax related information. The indicator did not change but the target was made more ambitious to reflect a broader use of procurement framework agreements. This indicator was revised to better align it with the objective and to make it directly attributable to the supported actions. Also, its scope was broadened to assess progress with respect to the debt management systems, in line with the methodology of the WB s Debt Management and Performance Assessment Tool. 28

41 DPL1 Results Indicators DPL2 Results Indicators DPL3 Result Indicators Notes Objective 4. Expanding Social Transfer Programs and Improving the Capacity of Institutions for Targeting The number of households covered by the Red de The proxy means test is in use to select all households that enter in By 2014, the revised proxy means test is in use to select all This wording of the indicator was adjusted to better align it with the Oportunidades increases the Red de Oportunidades CCT households that enter in the Red objective of improving the by 5% (baseline: program (baseline: 2009=0 de Oportunidades CCT program capacity of institutions for 2010=72,000 households; percent). (baseline: 2009=0 percent) targeting social transfer programs. target: 2011=75,260 households. Percentage of beneficiaries of 100 a los 70 for whom compliance with health coresponsibility determines payment (baseline: 2010=0; target: 2011 = 10) The Beca Universal program covers all eligible children in grades 7-12 in public schools (baseline: 2010=291,000 children; target: 2011=466,000 children). Increased ability of MIDES to conduct recertification of beneficiaries (evidenced by resolution and recertification strategy of 100 a los 70) in 2014 (baseline 2009=no tools to conduct recertification). Percentage of children from the poorest quintile who receive Beca Universal (baseline: 2009=0; target 2014=70 percent) Increased ability of MIDES to conduct recertification of beneficiaries of 100 a los 70 through the regulation of Law 86 and the recertification strategy of 100 a los 70 in 2014 (baseline: 2009=no technical tools nor legal support to conduct recertification). By 2014, MIDES has issued quarterly reports based on the single registry assessing the coverage and efficiency of social programs, including individual duplications at household level (baseline: 2009=no report). Percentage of children from the poorest quintile who receive Beca Universal (baseline: 2009=0; target: 2014=70 percent). The number of people with severe disabilities and in poverty or vulnerable condition covered by the Ángel Guardián program reached 10,000 (baseline: 2009=0; target: 2014=10,000) This indicator was revised under DPL2 because the necessary instruments for the recertification of beneficiaries of the 100 a los 70 program were not in place. The updated indicator was directly attributable to the actions in the program. This indicator was added under DPL3 to assess progress with regards to the enhancement of monitoring and evaluation systems, related to the objective of improving the capacity of institutions for targeting social transfers. This indicator was updated under DPL2 to make it more ambitious. This indicator was added under DPL3 to monitor progress with regards to the objective of expanding social transfer programs. 29

42 Prior Actions Supported by DPL1 The Government has widened its tax base and reduced tax exemptions by enacting Law 8 of 2010, which: (i) increases the ITBMS rate from 5 to 7 percent; (ii) eliminates ITBMS exemptions for air passenger transport, residential phone calls and lubricants; (iii) taxes real estate transactions in the Colon Free Zone and other existing free zones (including in free zones created in the future); (iv) expands the taxation of dividends, including for companies located in the Colon Free Zone and other existing free zones; (v) eliminate certain personal deductions; and (vi) modifies the calculation of expenditure deductions, to take into account the proportion of taxable income versus total income. The Government has implemented the following measures to improve the performance of its tax administration: (i) the establishment of an Administrative Tax Tribunal, as evidenced by Law 8 which creates the Tribunal and the appointment of the Magistrates for the Tribunal; and (ii) the creation of a unit of tax information sharing and a unit of international taxation within the Prior Actions Supported by DPL2 Annex 3. Policy and Results Matrix Prior Actions Supported by DPL3 30 Results Indicators DPL3 (end-2014) Mobilizing domestic tax revenue and increasing tax transparency Subcomponent: Mobilizing domestic tax revenue The Government, through the ANIP has taken steps to increase tax compliance by carrying out 10 audits of large taxpayers using advanced audit techniques. The Government, through the MEF, has created the LTU within the DGI and has made it operational through: 1) the identification of 72 Large Taxpayers; 2) the selection and training of ten (10) tax auditors to carry out audits of large taxpayers; 3) the preparation by DGI of an action plan to be implemented by the LTU in 2013 to increase tax collection from Large Taxpayers; and 4) the implementation of an audit system that tracks validation of Large Taxpayers compliance against their declared tax liabilities; as evidenced by (i) Ministerial Resolution No. 065 issued by the MEF on December 12, 2012 and published in the Government s Official Gazette on January 4, 2013 and (ii) the DGI s Note No dated December 11, 2012 to the Bank. 1. Central Government tax revenue as a share of GDP is at least 12 percent in 2014 (baseline: 2009=11 percent). 2. ITBMS revenue increased by at least 1 percentage point of GDP (baseline: 2009=2.3 percent; target: 2014=3.3). 3. The LTU covers at least 55 percent of total tax revenue in 2014 (baseline: 2009=0 percent). Status (as of end 2014) Not Achieved The Central Government tax revenue as a share of GDP reached 11 percent of GDP in 2014 The tax-to-gdp ratio maintained the baseline value of 11 percent Partially Achieved ITBMS revenue increased by 0.8 percentage point from a baseline of 2.3 percent of GDP in 2009, reaching a total of 3.1 percent of GDP in The ITBMS revenue increased but fell short of the target value by 0.2 percentage points of GDP Partially Achieved Partially Achieved. By 2014, the LTU covered 31 percent of total income tax collection. According to the Government, this indicator is appropriate, as the primary focus of the LTU is to monitor income taxes.

43 Prior Actions Supported by DPL1 DGI The Government has taken steps to implement some of the Global Forum s Peer Review-Phase 1, as evidenced by: (i) signing double taxation conventions with 10 countries; (ii) signing of the Agreement for Tax Cooperation and Exchange of Information Related to Taxes with the United States; (iii) enactment of Law 33 which empowers the DGI to obtain information for the purposes of complying with any international agreement that provides for the exchange of information in tax matters, regardless of the relevance of the information for domestic tax purposes; and (iv) enactment of Law 2 of The Government has taken steps to improve the efficiency and transparency of its national procurement system, as evidenced by the implementation of a new e- procurement platform, PanamaCompra (version 2.0) including the core system for publication and receipt of bidding offers, which is currently being used by the Central Government. Prior Actions Supported by DPL2 The Government, through DGI s Subdirección de Intercambio de Información Tributaria has effectively exchanged tax information with foreign tax jurisdictions by responding to twenty one (21) exchanges of information requests, in accordance with Law 2 of February 1, 2011 and its corresponding tax information sharing obligations, as evidenced by DGI s Note No dated December 13, The Government, through its Dirección General de Contrataciones Públicas, within the e-procurement platform PanamaCompra, has introduced new mandatory Framework Agreements for all Public Entities since April 2011; and published all Framework Agreements signed in years 2011 and Prior Actions Supported by DPL3 Subcomponent: Increasing tax transparency The Government has adopted a custody regime for bearer shares for purposes of facilitating the identification of the ownership of said type of shares. Modernizing public procurement practices Results Indicators DPL3 (end-2014) 4. By 2014, Panama has signed 12 tax information exchange agreements and has exchanged information as requested (baseline: 2009=no TIEAs in place). 5. Central government agencies and all others subject to Law 22 and its modifications use framework agreements and the number of catalogue items procured under those framework agreements is increased (baseline: 2009= ; target: 2014= 7,300). Achieved Status (as of end 2014) As of December 2014, Panama has signed 9 23 Tax Information Exchange Agreements (TIEAs); and has exchanged tax related information, upon request, with 16 countries Moreover, Panama has negotiated a TIEA with Germany (to be signed soon) and is currently negotiating TIEAs with Australis, Japan and India. The result indicator would be complied, as 13 countries have and are in the process of signing TIEAs agreements. Achieved As of December 2014 the number of catalogue items procured under framework agreements reached from a baseline of in The target has been exceeded by182 percent. 23 OECD Report The baseline for 2009 has been updated 31

44 Prior Actions Supported by DPL1 The Government has started to design a medium term debt management strategy which includes the development of its domestic public debt market, as evidenced by: (a) Cabinet Decree No.4 of January 26, 2010, which authorizes the issuance up to US$600 million in Treasury Notes; and (b) the issuance of Treasury Notes with an aggregate value of more than US$500 million during The Government has taken the following measures to increase the outreach of its key social protection programs: Improved the targeting of beneficiaries under its Red de Oportunidades CCT by: (i) eliminating ineligible households enrolled in the program; and (ii) enrolling 3,000 new households, eligible as per the proxy-means test. Improved the operating rules and enhanced the proper targeting of poor and vulnerable beneficiaries under its 100 a los 70 cash transfer program, through the enactment of Law 86 of Prior Actions Supported by DPL2 The Government, through the MEF has approved the organizational structure of the Crédito Público, including the functions and responsibilities for each of its internal units, as evidenced by Ministerial Resolution No 003 issued by the MEF on January 16, The Government, through MIDES, has adopted the new criteria to evaluate the eligibility of elderly citizens for the 100 a los 70 cash transfer program, as evidenced by Ministerial Resolution No. 225, 2012 issued by MIDES on October 4, 2012 and published in the Borrower s Official Gazette on December 13, Prior Actions Supported by DPL3 32 Results Indicators DPL3 (end-2014) Improving the institutional arrangements for debt management The Government through MEF has adopted a plan for domestic debt market development including: (i) the adoption of a policy and issuance of regulation for the promotion and functioning of the primary dealers program; (ii) the modification of the contracts with international credit rating agencies to have domestic sovereign bonds rated; and (iii) the selection of a worldwide known financial information platform to conduct domestic Government bond auctions on this platform. 6. By 2014, the medium term debt management strategy is published and revised annually and corresponding debt evaluation reports compare the evolution of risk indicators with the targets in the strategy in 2014 (baseline: 2009=no formal debt management strategy). Expanding social transfer programs and improving the capacity of institutions for targeting The Government through 7. By 2014, the revised proxy MIDES has adopted a policy means test is in use to select all and issued regulations for the households that enter in the better targeting of Red de Oportunidades CCT beneficiaries of the 100 a los program (baseline: 2009=0 70 program including percent). provisions (i) to verify compliance with beneficiaries co-responsibilities and processes for entry to and exit from said program; (ii) to incorporate beneficiaries in the Registro Único de Beneficiarios; and (iii) to formally incorporate the Secretaría Ejecutiva del Programa 100 a los 70 into MIDES. The Government has developed a Registro Único de 8. Increased ability of MIDES to conduct recertification of beneficiaries of 100 a los 70 through the regulation of Law 86 and the recertification strategy of 100 a los 70 in 2014 (baseline: 2009=no technical tools nor legal support to conduct recertification). Status (as of end 2014) Achieved Panama prepared and published a Medium Term Debt Strategy covering the period and prepares debt evaluation reports that compare the risk indicators with the targets in the strategy. At end 2014, all of the risk indicators included in the MTDS: percentage of internal debt, percentage of debt maturing the following year, maturity of domestic debt, maturity of total debt, percentage of debt with fixed interest rates, and percentage of total debt in US dollars, are within the range established in the strategy. Achieved In 2014, the proxy means test (PMT) used to determine eligibility of households that enter the CCT program has been revised and implemented to reflect more accurately the poverty conditions. This is an important step towards reducing targeting errors and ensuring an appropriate expansion of a very progressive scheme. Achieved In 2014, a Consultancy Support Report was issued to strengthen the operational & technical capacity of the Government s program 100 a los70. The report was used by the Social Cabinet and the World Bank to have an approximate situation of the elderly in Panama. In addition, a consulting work for the

45 Prior Actions Supported by DPL1 Established the Beca Universal scholarship program through the enactment of Law 40 of 2010, and started implementing said scholarship program in public secondary schools during Prior Actions Supported by DPL2 The Government, through IFARHU, has expanded the Beca Universal scholarship program to include grades 1 to 6 of all the Borrower s public schools. Prior Actions Supported by DPL3 Beneficiarios for the following social protection programs Red de Oportunidades, 100 a los 70, and Evaluación Social CCT programs to improve targeting and harmonize information among the programs. The Government has taken steps to establish a monitoring and evaluation system for the Beca Universal program by including individual based questions on scholarship benefits into the 2013 Encuesta de Propósitos Múltiples. The Government has created the Programa Ángel Guardián, a social assistance program for people with severe disabilities who are in extreme poverty and in vulnerable dependent condition. Results Indicators DPL3 (end-2014) 9. By 2014, MIDES has issued quarterly reports based on the single registry assessing the coverage and efficiency of social programs, including individual duplications at household level (baseline: 2009=no report). 10. Percentage of children from the poorest quintile who receive Beca Universal (baseline: 2009=0; target: 2014=70 percent). 11. The number of people with severe disabilities and in poverty or vulnerable condition covered by the Ángel Guardián program reached 10,000 (baseline: 2009=0; target: 2014=10,000) Status (as of end 2014) 120 a los65 program was done aimed at reinforcing the management of the Executive Secretariat of the 100 a los70 intended to improve internal administrative processes and maximize the results of the program. Achieved MIDES issues bi-monthly reports of the beneficiaries based on the RU that undergoes dynamic updates of deaths, transition to 120/65, and other. In 2015 MIDES initiated the debugging of the registry of beneficiaries: 15,665 families not meeting the eligibility criteria left the program and 12,339 families were included for the first time. Achieved As of 2014 the number of children from the poorest quantile who receive Beca Universal reached 100 percent Achieved As of 2015, Angel Guardian supported people with severe disabilities, exceeding the target value of

46 Annex 4. Prior Actions for the DPL series First Development Policy Loan The Government has widened its tax base and reduced tax exemptions by enacting Law 8 of 2010, which: (i) increases the ITBMS rate from 5 to 7 percent; (ii) eliminates ITBMS exemptions for air passenger transport, residential phone calls and lubricants; (iii) taxes real estate transactions in the Colon Free Zone and other existing free zones (including in free zones created in the future); (iv) expands the taxation of dividends, including for companies located in the Colon Free Zone and other existing free zones (including in free zones created in the future by the Government); (v) eliminates certain personal deductions; and (vi) modifies the calculation of expenditure deductions, to take into account the proportion of taxable income versus total income (including tax exempt income and income from foreign sources) The Government has implemented the following measures to improve the performance of its tax administration: (i) the establishment of an Administrative Tax Tribunal, as evidenced by Law 8 of 2010 which creates the Tribunal and the appointment of the Magistrates for the Tribunal; and (ii) the creation of a unit of tax information sharing and a unit of international taxation within the DGI. The Government has taken steps to implement some of the Global Forum s Peer Review- Phase 1, as evidenced by: (i) signing double taxation conventions with 10 countries; (ii) signing of the Agreement for Tax Cooperation and Exchange of Information Related to Taxes with the US; (iii) enactment of Law 33 of 2010, which empowers the DGI to obtain information for the purposes of complying with any international agreement that provides for the exchange of information in tax matters, regardless of the relevance of the information for domestic tax purposes; and (iv) enactment of Law 2 of The Government has taken steps to improve the efficiency and transparency of its national procurement system, as evidenced by the implementation of a new e-procurement platform, PanamaCompra including the core system for publication and receipt of bidding offers, which is currently being used by the Central Government. The Government has started to design a medium term debt management strategy which includes the development of its domestic public debt market, as evidenced by: (a) Cabinet Decree No.4 of January 26, 2010, which authorizes the issuance up to US$600 million in Treasury Notes; and (b) the issuance of Treasury Notes with an aggregate value of more than US$500 million during The Government has taken the following measures to increase the outreach of its key social protection programs: Improved the targeting of beneficiaries under its Red de Oportunidades CCT by: (i) eliminating ineligible households enrolled in the program; and (ii) enrolling 3,000 new households, eligible as per the proxy-means test. Improved the operating rules and enhanced the proper targeting of poor and vulnerable beneficiaries under its 100 a los 70 cash transfer program, through the enactment of Law 86 of Established the Beca Universal scholarship program through the enactment of Law 40 of 2010, and started implementing said scholarship program in public secondary schools during Second Development Policy Loan The Government, through the MEF, has created the LTU within the DGI and has made it operational through: 1) the identification of 72 Large Taxpayers; 2) the selection and training of ten (10) tax auditors to carry out audits of large taxpayers; 3) the preparation by DGI of an Status Completed Completed Completed Completed Completed Completed Completed 34

47 action plan to be implemented by the LTU in 2013 to increase tax collection from Large Taxpayers; and 4) the implementation of an audit system that tracks validation of Large Taxpayers compliance against their declared tax liabilities; as evidenced by (i) Ministerial Resolution No. 065 issued by the MEF on December 12, 2012 and published in the Government s Official Gazette on January 4, 2013 and (ii) the DGI s Note No dated December 11, 2012 to the Bank. The Government, through DGI s Subdirección de Intercambio de Información Tributaria has effectively exchanged tax information with foreign tax jurisdictions by responding to twenty one (21) exchanges of information requests, in accordance with Law 2 of February 1, 2011 and its corresponding tax information sharing obligations, as evidenced by DGI s Note No dated December 13, The Government, through its Dirección General de Contrataciones Públicas, within the e- procurement platform PanamaCompra, has introduced new mandatory Framework Agreements for all Public Entities since April 2011; and published all Framework Agreements signed in years 2011 and The Government, through the MEF has approved the organizational structure of the Crédito Público, including the functions and responsibilities for each of its internal units, as evidenced by Ministerial Resolution No 003 issued by the MEF on January 16, The Government, through MIDES, has adopted the new criteria to evaluate the eligibility of elderly citizens for the 100 a los 70 cash transfer program, as evidenced by Ministerial Resolution No. 225, 2012 issued by MIDES on October 4, 2012 and published in the Borrower s Official Gazette on December 13, The Government, through IFARHU, has expanded the Beca Universal scholarship program to include grades 1 to 6 of all the Borrower s public schools. Third Development Policy Loan The Government, through the ANIP has taken steps to increase tax compliance by carrying out 10 audits of large taxpayers using advanced audit techniques The Government has adopted a custody regime for bearer shares for purposes of facilitating the identification of the ownership of said type of shares. The Government through MEF has adopted a plan for domestic debt market development including: (i) the adoption of a policy and issuance of regulation for the promotion and functioning of the primary dealers program; (ii) the modification of the contracts with international credit rating agencies to have domestic sovereign bonds rated; and (iii) the selection of a worldwide known financial information platform to conduct domestic Government bond auctions on this platform. The Government through MIDES has adopted a policy and issued regulations for the better targeting of beneficiaries of the 100 a los 70 program including provisions (i) to verify compliance with beneficiaries co-responsibilities and processes for entry to and exit from said program; (ii) to incorporate beneficiaries in the Registro Único de Beneficiarios; and (iii) to formally incorporate the Secretaría Ejecutiva del Programa 100 a los 70 into MIDES. The Government has developed a Registro Único de Beneficiarios for the following social protection programs Red de Oportunidades, 100 a los 70, and Evaluación Social CCT programs to improve targeting and harmonize information among said programs The Government has taken steps to establish a monitoring and evaluation system for the Beca Universal program by including individual based questions on scholarship benefits into the 2013 Encuesta de Propósitos Múltiples. The Government has created the Program Ángel Guardián, a social assistance program for people with severe disabilities who are in extreme poverty and in vulnerable dependent condition. Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed 35

48 Annex 5. Analytical and Advisory Activities (AAA) Supporting the DPL Program PDO AAA Work Link to Development Agenda Mobilizing domestic tax revenue and increasing tax transparency Modernizing procurement practices Improving the institutional arrangement for debt management Expanding social transfer programs and improving the capacity of institutions for targeting Public Expenditure Review (WB 2006) Panamá: Consideraciones metodológicas y estimación de los gastos tributarios y del coeficiente de cumplimento del ITBMS (Sabaini 2009) Expanding Taxable Capacity and Reaching Revenue Potential : cross-country analysis (Le, Moreno-Dodson and Rojchaichaninthorn WB 2008) Peer Review Report Phase 1 Legal and Regulatory Framework (OECD 2010) Public Debt Markets in Central America, Panama, and the Dominican Republic (IMF 2007) Non Lending Technical Assistance on Debt Management (WB NLTA 2010) Public Debt Management and Market Development Needs Assessment (WB 2007) Panama Poverty Assessment (WB 2011) Review of Social Assistance Programs and Recommendations for Priorities and the Way Forward (Marques, 2009) Red de Oportunidades: Conditional cash transfer evidence from Panamá (Arraiz, S. Rozo 2011) Mejores Empleos en Panamá: El Rol del Capital Humano (WB 2012) Disability and poverty: A survey of World Bank Poverty Assessments and implications (Braithwaite and Mont, 2009) Increase the tax base and reduced tax exemptions Increase the ITBMS rate and eliminate ITBMS exemptions Increase tax compliance by carrying out audits of large taxpayers Increase the transparency of tax information, and Adoption of a custody regime for bearer shares to facilitate the identification of its ownership Public Expenditure Review (WB 2006) Implement a plan for domestic debt market development Prepare and published a Medium Term Debt Strategy Modify contracts with international credit rating agencies to facilitate rating of domestic sovereign bonds Conduct domestic Government bond auctions under worldwide financial information platform Improve the targeting and harmonization of social programs Develop a Single Registry for the main social protection programs Improve the targeting of beneficiaries under Red de Oportunidades CCT by eliminating ineligible ones 36

49 Annex 6. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members P Panama First Programmatic Fiscal Management and Efficiency of Expenditures Development Policy Loan Names Title Unit Responsibility/ Specialty Lending Christian Yvez Gonzalez Senior Economist LCSPE Co-TTL Jasmin Chakeri Senior Economist LCSPE Co-TTL Cigdem Aslan Senior Financial Officer BDM Pedro Arizti Public Sector Specialist LCSPS Antonio Blasco Senior Financial Management Specialist LCSFM Ludmilla Butenko Country Manager LCC2C Andrea Coppola Young Professional LCSPE Enrique Fanta Senior Public Sector Specialist LCSPS Luisa Felino Research Analyst LCSPE Meilyn Gem,, Operations Analyst LCCPA Trina Haque, Country Operations Adviser LCC2 Amer Hasan Consultant LCSPP Guillermo Lagarda Research Analyst LCSPE Joao Malta Senior Procurement Specialist LCSPT Pedro Olinto Senior Economist LCSPP Sara Paredes Executive Assistant LCCPA Kristell Marie Parchment Kristell Marie Parchment LCCPA Patricia Chacon Holt Program Assistant LCSPE Ludovic Subran Social Protection Economist LCSHS Ricardo Tejada Financial Officer BDM Antonio Velandia Lead Financial Officer BDM Rodrigo A. Chaves Sector Manager LCSPE J. Humberto Lopez Lead Economist/Sector Leader LCSPR Zeljko Bogetic Lead Economist ECSPT3 Sandeep Mahajan Lead Economist ATFP1 Raul Felix Junquera Senior Public Sector Specialist PREMPS Richard Stern Lead Investment Policy Officer CICRS Komal Mohindra Senior Private Sector Specialist CICRS Matthew Huggins Principal Counsel CLEFM P Panama Second Programmatic Fiscal Management and Efficiency of Expenditures Development Policy Loan Project Names Title Unit Responsibility/ Specialty Friederike Koehler-Geib Senior Economist GMF04 Co-TTL Maria Gonzalez de Asis Lead Operation s officer GGHVP Co-TTL Adriana Cardozo Consultant GMF09 Adrienne Hathaway Research Analyst GGO16 Agustin Indaco Junior Professional Associate LCSPE Aleksandra Iwulska Junior Professional Associate LCSPE 37

50 Andres Mac Gaul Senior Procurement Specialist GGO03 Antonio Blasco Senior Financial Management Specialist GGO21 Antonio Velandia-Rubiano Lead Financial Officer/Sovereign Debt FABDM Bertha Mburugu Program Assistant GGO16 Christopher Humphrey Consultant LCSPE Cristian D'Amelj Senior Counsel LEGLE Daniel Alvarez Senior Public Sector Mgmt. Spec. GGO16 Edmundo Murrugarra Senior Social Protection Economist GSP04 Fabianne Mroczka Consultant Karina Ramirez Arras Research Analyst GGO16 Katherine M. Scott Senior Economist GPV04 Luis de la Plaza, Lead Financial Officer FABBK Maria Sierra Meilyn Gem Operations Officer LCCPA Nathalie Picarelli Junior Professional Associate LCSPE Patricia de la Fuente Hoyes Senior Financial Management Specialist GGO22 Rodrigo Silveira Cabral Senior Financial Officer FABDM Rocio Malpica Senior Counsel LEGLE Silvia Gulino Program Assistant GMF04 Victor Manuel Ordonez Conde Senior Finance Officer WFALN Abha Prasad Lead Debt Specialist GMF13 David Gould Lead Economist ECACE Manuel Salazar Lead Social Protection Specialist GSP01 Raul Junquera Public Sector Specialist GGO18 P Panama Third Programmatic Fiscal Management and Efficiency of Expenditures Development Policy Loan Names Title Unit Responsibility/ Specialty Friederike (Fritzi) Koehler-Geib Senior Economist GMF04 Co-TTL Rong Qian Economist GMF04 Co-TTL Adriana Cardozo Consultant GFM09 Aleksandra Iwulska Junior Professional Associate LCSPE Andres Mac Gaul Senior Procurement Specialist GGO03 Antonio Blasco Sr. Financial Management Specialist GGO22 Concepcion Aisa Otin Senior Financial Officer FABBK Diana Mercedes Lachy ET Temporary GMFD1 Edmundo Murrugarra Senior Social Protection Economist GSP04 Kinnon Scott Senior Economist GPV04 Kiyomi Cadena Consultant GPV04 Meilyn Gem Operations Officer LCCPA Patricia de la Fuente Hoyes Sr. Financial Management Specialist GGO22 Raul Junquera Varela Lead Public Sector Specialist GGO18 Rodrigo Silveira Cabral Senior Financial Officer FABDM Rocio Malpica Senior Counsel LEGLE Silvia Gulino Operations Analyst GMF01 Abha Prasad Lead Debt Specialist GMF13 Peer Reviewer David Rosenblatt Economic Adviser DECOS Peer Reviewer 38

51 Manuel Salazar Lead Social Protection Specialist GSP01 Peer Reviewer Munawer Sultan Khwaja Peer Reviewer 1.7 (b) Staff Time and Cost P Panama First Programmatic Fiscal Management and Efficiency of Expenditures Development Policy Loan Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including travel No. of staff weeks and consultant costs) Lending FY Total: Supervision FY Total: P Panama Second Programmatic Fiscal Management and Efficiency of Expenditures Development Policy Loan Project Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including travel No. of staff weeks and consultant costs) Lending FY Total: Supervision FY Total: P Panama Third Programmatic Fiscal Management and Efficiency of Expenditures Development Policy Loan Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including travel No. of staff weeks and consultant costs) Lending FY Total: Supervision FY Total:

52 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR 40

53 41

54 Annex 8. List of Supporting Documents Inter-American Development Bank and World Bank (2013) Republic of Panama: Public Expenditure and Financial Accountability Report. Report No. AUS9418 International Monetary Fund (2016) IMF Executive Board Concludes 2016 Article IV Consultation with Panama Press Release No. 16/276 International Monetary Fund (2015). Panama Article IV Consultation Staff Report. IMF Country Report No. 15/237 Koehler-Geib, Friederike (Fritzi), Kinnon Scott, Ayat Soliman, J. Humberto Lopez Panama: Locking in Success. Systematic Country Diagnostic. Washington, DC: World Bank. World Bank (2010). Country Partnership Strategy for the Republic of Panama FY Report No PA. World Bank (2013) Progress Report on the Country Partnership Strategy for the Republic of Panama FY World Bank (2015) Country Partnership Framework for the Republic of Panama for the Period FY15- FY21 Report No PA World Bank (2011) Document for the First Programmatic Fiscal Management and Efficiency of Expenditures Development Policy Loan. Report No PA World Bank (2012) First Programmatic Fiscal Management and Efficiency of Expenditures Development Policy Loan- Project Restructuring Report No PA World Bank (2013) Document for the Second Programmatic Fiscal Management and Efficiency of Expenditures Development Policy Loan. Report No PA World Bank (2013) Document for the Third Programmatic Fiscal Management and Efficiency of Expenditures Development Policy Loan. Report No PA World Bank (2015) Document for the First Programmatic Shared Prosperity Development Policy Financing Report No. AB7708 World Bank (2016) Document for Second Programmatic Shared Prosperity Development Policy Financing Report No PA World Bank (2015) Panama Social Expenditure and Institutional Review. Report No

55 43