Press Release No. 22/260

IMF Executive Board Completes the Second Review Under the Precautionary and Liquidity Line Arrangement for Panama

July 15, 2022

• The IMF Executive Board completed the second review under the two-year Precautionary and Liquidity Line (PLL) arrangement for Panama which was approved on January 19, 2021 in the amount equivalent to US$2.5 billion (SDR 1.884 billion).
• The PLL serves as insurance against extreme external shocks emanating from global uncertainties against the backdrop of the war in Ukraine and new variants of the COVID-19 virus that may derail economic recovery. Access to the full amount of the PLL equivalent to US$2.5 billion (SDR 1.884 billion) will be available after completion of this review. The authorities intend to continue treating the arrangement as precautionary.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the second review under the Precautionary and Liquidity Line (PLL) Arrangement for Panama for SDR 1.884 billion (500 percent of Panama’s quota, equivalent to about US$2.5 billion). The Panamanian authorities have not drawn on the arrangement and intend to continue treating it as precautionary. The PLL serves as insurance against extreme external shocks stemming from the persistent global uncertainties.

Panama’s economy recovered strongly in 2021 with the gradual easing of the temporary containment measures as health and sanitary conditions improved. Real output expanded by 15.3 percent in 2021, and the growth momentum is expected to continue into 2022, reinforced by the resumption of the construction of a new metro line and improving private investment.

While Panama is able to meet its external financing needs under present conditions, the PLL arrangement provides insurance against externally driven downside risks. Policy priorities under the PLL include boosting the post-pandemic recovery, supporting an adequate level of spending on health and social needs, fortifying financial stability, and further strengthening institutional policy frameworks that include financial integrity and data adequacy. Panama has adopted these policies envisaged under the PLL arrangement and continued to adhere to the amended fiscal rule which safeguards debt sustainability over the medium term. The authorities remain committed to continue strengthening Panama’s institutional frameworks, including for the effectiveness of the AML/CFT regime, transparency of legal persons and legal arrangements including for beneficial ownership information, data adequacy and statistics reporting, multi-annual budgeting, and financial sector regulation and supervision.

Following the Executive Board discussion, Mr. Kenji Okamura, Deputy Managing Director and Chair, made the following statement:

“Panama’s economy recovered strongly in 2021, driven by a rebound in domestic demand and higher copper exports, despite continuing challenges from the COVID-19 pandemic and global uncertainties. The recovery is expected to continue in 2022, subject to significant risks, including from global uncertainties arising from the war in Ukraine, higher crude oil prices, tighter global financial conditions, and new variants of the COVID-19 virus. Continued strong policies and commitment under the PLL will help to alleviate vulnerabilities, strengthen the recovery, and enhance market confidence.

“Panama continues to meet the PLL qualification criteria. The authorities intend to continue to treat the PLL arrangement as precautionary.

“The authorities are committed to the fiscal rule and to gradual fiscal consolidation, which is central to reinforcing debt sustainability. Efforts to strengthen revenue mobilization and contain current expenditure, while prioritizing and appropriately targeting capital and social spending are important. Continued prudent policies and contingency planning would help to alleviate risks to the budget. Measures to strengthen public financial management and fiscal transparency are also important.

“Measures to strengthen financial stability and enhance financial integrity are central to preserving Panama’s position as a regional financial center. Avoiding further delays in implementing the FATF action plan, and the related reputational risks, would support an exit from the FATF grey list. Efforts to address the remaining deficiencies in the AML/CFT regulatory framework are critical. The authorities are taking steps to strengthening regulatory, supervisory, and macroprudential policy frameworks.”