{
  "title": "Precautionary Credit Line Provides Panama with Crisis Insurance",
  "publication": "IMF News, January 20, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/01/19/na012021-precautionary-credit-line-provides-panama-with-crisis-insurance",
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  "summary": "IMF mission chief for Panama, Alejandro Santos, speaks about the country’s outlook and using the 2-year Precautionary Liquidity Line of $2.7 billion as an insurance policy against shocks.",
  "publishDate": "2021-01-20",
  "sections": [
    {
      "heading": "Pandemic impact and macroeconomic fallout",
      "content": "- Panama was \"severely affected\" by the COVID-19 pandemic due to its role as a regional trade, transportation, and finance hub.\n- Key observed impacts:\n  - Ship traffic through the Panama Canal dropped by \"about 10 percent\".\n  - Use of electricity fell by \"some 7 percent in 2020\".\n  - Output dropped by \"an estimated 9 percent in 2020\".\n  - Health and social spending pressures \"surged\".\n  - Panama has \"one of the highest COVID-19 fatality rates in the world\".\n  - Nationwide lockdowns were enforced; contagion \"remain high, particularly around Panama City\".\n  - Tax revenues—already \"well below the regional average\"—have fallen, resulting in a widening fiscal deficit and an increase in public debt."
    },
    {
      "heading": "Rationale for the 2-year Precautionary Liquidity Line of $2.7 billion",
      "content": "- The arrangement is described as an \"insurance policy against risks\" and aims to \"boost investor confidence\".\n- It provides contingent access to liquidity if a second wave of COVID-19 or other shocks trigger a deeper recession or disruptions in private capital flows.\n- Qualifying for a precautionary credit line requires \"sound economic fundamentals and institutional policy frameworks, and a good track record of economic performance\", which the line also signals to markets."
    },
    {
      "heading": "Policy priorities supported by the arrangement",
      "content": "- Immediate priorities:\n  - Facilitating vaccination.\n  - Supporting an adequate level of social and health spending.\n  - Continuing to strengthen institutional policy frameworks, including financial integrity and data adequacy.\n  - Preparing the economy for a post-pandemic recovery.\n- How the precautionary line helps:\n  - Boosts market confidence.\n  - Provides protection against risks, helping the country \"weather the crisis and lay the groundwork for recovery\"."
    },
    {
      "heading": "Past IMF engagement and structural reforms",
      "content": "- Historical engagement:\n  - Panama has had \"20 IMF programs, two-thirds of them precautionary\".\n- Reforms achieved under past programs included:\n  - Reinforcing expenditure controls.\n  - Strengthening revenue collection.\n  - Privatizing enterprises.\n  - Improving financial supervision.\n  - Combating money laundering.\n  - Establishing targeted transfer programs to reduce poverty.\n- Outcomes attributed to these reforms:\n  - The economy grew at an \"average rate of 6 percent between 1992 and 2019\".\n  - Achieved \"the highest per capita income in Latin America\"."
    },
    {
      "heading": "Financial integrity and FATF de-listing efforts",
      "content": "- Panama agreed on an action plan with the Financial Action Task Force (FATF) to address weaknesses related to financial integrity.\n- Authorities have hired \"highly qualified international experts on anti-money laundering and combating the financing of terrorism\" to guide the de-listing process and ensure adherence to international standards.\n- The IMF is providing technical assistance in this area.\n\nInternational Monetary Fund — \"Precautionary Credit Line Provides Panama with Crisis Insurance\" (January 20, 2021).\n\n---\n\n\n References\n\n- https://www.imf.org/en/News/country-focus\n- PRESS CENTER\n- Read the press release\n- Panama and the IMF\n- Factsheet: IMF Precautionary and Liquidity Line\n- IMF and COVID-19\n- Regional Focus: Central America\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/01/19/na012021-precautionary-credit-line-provides-panama-with-crisis-insurance"
    }
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    "Published: January 20, 2021",
    "Panama was \"severely affected\" by the COVID-19 pandemic due to its role as a regional trade, transportation, and finance hub.",
    "Key observed impacts:",
    "The arrangement is described as an \"insurance policy against risks\" and aims to \"boost investor confidence\".",
    "It provides contingent access to liquidity if a second wave of COVID-19 or other shocks trigger a deeper recession or disruptions in private capital flows.",
    "Qualifying for a precautionary credit line requires \"sound economic fundamentals and institutional policy frameworks, and a good track record of economic performance\", which the line also signals to markets.",
    "Immediate priorities:",
    "How the precautionary line helps:",
    "Historical engagement:",
    "Reforms achieved under past programs included:",
    "Outcomes attributed to these reforms:",
    "Panama agreed on an action plan with the Financial Action Task Force (FATF) to address weaknesses related to financial integrity.",
    "Authorities have hired \"highly qualified international experts on anti-money laundering and combating the financing of terrorism\" to guide the de-listing process and ensure adherence to international standards.",
    "The IMF is providing technical assistance in this area.",
    "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[Read the press release](https://www.imf.org/en/News/Articles/2021/01/20/pr2119-imf-executive-board-approves-billion-precautionary-and-liquidity-line-for-panama)",
    "[Panama and the IMF](https://www.imf.org/en/Countries/PAN)",
    "[Factsheet: IMF Precautionary and Liquidity Line](https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/20/45/Precautionary-and-Liquidity-Line)",
    "[IMF and COVID-19](https://www.imf.org/en/Topics/imf-and-covid19)",
    "[Regional Focus: Central America](https://www.imf.org/en/News/Articles/2020/12/15/na121720when-it-rains-it-pours-pandemic-and-natural-disasters-challenge-central-americas-economies)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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