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

IMF News, July 28, 2021

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Canonical URL: IMF Executive Board Completes the First Review Under the Precautionary and Liquidity Line Arrangement for Panama

The two-year Precautionary and Liquidity Line (PLL) arrangement for Panama was approved on January 19, 2021 in the amount equivalent to US$2.7 billion (SDR 1.884 billion).
The PLL corresponds to 500 percent of Panama’s quota (SDR 1.884 billion).
Access in the first program year is equivalent to about US$1.35 billion (0.942 billion SDR).
The Panamanian authorities have not drawn on the arrangement and intend to continue treating the arrangement as precautionary.
The PLL serves as insurance against extreme external shocks stemming from the COVID-19 pandemic.

Panama’s output contracted by 17.9 percent in 2020 due to stringent containment measures and mobility restrictions that significantly reduced economic activity, especially tourism.
Hurricane Eta and tropical storm Iota curtailed a large part of the country's agricultural production in 2020, contributing to the shock.
The fiscal position deteriorated significantly in 2020 amid revenue shortfalls and expenditure pressures.
The outlook for 2021 is described as optimistic, supported by a rebound in the global economy, a steadfast COVID-19 vaccination program, and supportive macroeconomic policies.
Important downside risks identified:
- A possible resurgence of the COVID-19 pandemic that would disrupt global trade and capital flows and adversely affect Panama’s canal and logistics sectors.
- A possible lack of progress on exiting rapidly the FATF grey list.

The PLL’s policy priorities include:
- Supporting an adequate level of spending on health and social needs.
- Boosting the post-pandemic recovery.
- Further strengthening institutional policy frameworks, including financial integrity and data adequacy.
The authorities have adopted the policies envisaged under the PLL arrangement and have adhered to the amended fiscal rule.
The authorities continue to strengthen institutional frameworks, including:
- The AML/CFT regime in accordance with the FATF action plan.
- Statistics reporting.
- Multiannual budgeting.
- Financial regulation and supervision.
The performance under the program has been strong and Panama continues to meet the PLL qualification criteria.
The authorities remain resolute in implementing the policies under the PLL and intend to treat the arrangement as precautionary.

Recalibrate policy responses to safeguard macroeconomic and financial stability.
Address FATF’s concerns to successfully exit the grey list by:
- Expediently addressing the remaining deficiencies in the AML/CFT regulatory framework.
Adhere to the fiscal rule to ensure debt sustainability in the medium-term.
Enhance fiscal transparency.
Maintain tight supervisory oversight to safeguard financial stability.
Strengthen data adequacy.
Prepare the economy for the post-pandemic recovery.

IMF Press Release No. 21/232, July 28, 2021 — IMF Communications Department