## 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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## Bibliographic details
- Published: July 28, 2021

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### Arrangement details and status
- 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.

### Economic impact and outlook
- 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.

### Policy priorities and program performance
- 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.

### Recommended policy actions and agenda during the PLL
- 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*

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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/)
- [press release No. 21/19](https://www.imf.org/en/News/Articles/2021/01/20/pr2119-imf-executive-board-approves-billion-precautionary-and-liquidity-line-for-panama)
- [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/2021/07/28/pr21232-panama-imf-executive-board-completes-first-review-under-pll-arrangement_