## IMF Executive Board Approves US$2.7 billion Precautionary and Liquidity Line for Panama to Address COVID-19 Pandemic

_IMF News, January 20, 2021_

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## Bibliographic details
- Published: January 20, 2021

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### Overview
- The IMF Executive Board approved a two-year arrangement for Panama under the Precautionary and Liquidity Line (PLL) in the amount equivalent to US$2.7 billion (SDR 1.884 billion).
- The arrangement is intended to serve as insurance against extreme external shocks stemming from the COVID-19 pandemic.
- The access under the PLL in the first year will be equivalent to about US$1.35 billion (0.942 billion SDR).
- The authorities intend to treat the arrangement as precautionary.

### Key figures and terms
- Total PLL amount: US$2.7 billion (SDR 1.884 billion).
- First-year access: about US$1.35 billion (0.942 billion SDR).
- PLL amount expressed as percent of quota: 500 percent of Panama’s quota.
- Duration: two-year arrangement.

### Economic context and rationale
- In 2020, Panama experienced:
  - A significant reduction in economic activity due to containment measures, especially in tourism.
  - Additional damage from hurricane Eta and tropical storm Iota that curtailed a large part of agricultural production.
  - An estimated output drop of 9 percent.
  - A significantly deteriorated fiscal position amid revenue shortfalls and expenditure pressures.
- While Panama can cover its external financing needs under present conditions, the PLL provides insurance against downside risks and is expected to boost market confidence.

### IMF assessment and Executive Board statement (Mitsuiro Furusawa)
- Panama qualifies for the PLL because of:
  - Sound economic fundamentals.
  - Strong institutional policy frameworks.
  - Long track record of good economic performance and policy implementation.
  - Commitment to maintain such policies in the future.
- Qualification specifics cited by Mr. Mitsuhiro Furusawa:
  - Panama performs strongly in three out of the five qualification areas: external, fiscal and monetary.
  - Panama does not substantially underperform in the other two areas: financial and data.
  - Panama meets the criteria for exceptional access.
- The PLL will help:
  - The authorities’ economic recovery efforts against the pandemic.
  - Address outstanding vulnerabilities.
  - Boost market confidence.

### Policy priorities and recommended measures under the PLL
- Support an adequate level of spending on health and the social sectors during the pandemic.
- Continue strengthening institutional policy frameworks, including:
  - Financial integrity.
  - Data adequacy.
- Prepare the economy for the post-pandemic recovery.
- Specific measures implemented by the authorities cited in the statement:
  - Temporary relaxation of fiscal deficit limits under the Social and Fiscal Responsibility Law to support health and social-related expenditures.
  - Permitting banks to drawdown their accumulated dynamic provisioning to absorb credit losses.
  - Loan restructurings for affected borrowers.
  - Commitment to a gradual fiscal consolidation and recalibration of policy responses once the pandemic recedes.
- Policy agenda during the PLL will focus on:
  - Facilitating prompt exit from the FATF grey list.
  - Strengthening data adequacy and public financial management.
  - Preparing the economy for post-pandemic recovery.

### PLL features and context
- The PLL was introduced in 2011 to more flexibly meet liquidity needs of member countries with sound fundamentals and strong records of policy implementation but with some remaining vulnerabilities.
- The arrangement is declared precautionary by the Panamanian authorities.

*IMF Press Release No. 21/19 — January 19, 2021*

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## References

- [Mitsuhiro Furusawa](http://www.imf.org/external/np/omd/bios/mf.htm)
- [Panama and the IMF](http://www.imf.org/external/country/PAN/index.htm)
- [Special Drawing Rights (SDRs) -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/special-drawing-rights-sdr)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker](https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker)
- [https://www.imf.org/external/NP/SEC/bc/eng/index.aspx](https://www.imf.org/external/NP/SEC/bc/eng/index.aspx)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2021/01/20/pr2119-imf-executive-board-approves-billion-precautionary-and-liquidity-line-for-panama_