IMF Executive Board Completes Second Review of Precautionary and Liquidity Arrangement for Panama
July 15, 2022
- The IMF Executive Board has completed the second review under the two-year Precautionary and Liquidity Line (PLL) arrangement for Panama, which was approved on January 19, 2021 for an amount equivalent to $2.5 billion (SDR 1.884 billion).
- The PLL serves as insurance against extreme external shocks emanating from global uncertainties amid the war in Ukraine and new variants of the COVID-19 virus that could 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 the completion of this review. Authorities intend to continue to treat the arrangement as a precautionary device.
The Executive Board of the International Monetary Fund (IMF) today completed the second review under the Precautionary and Liquidity Arrangement (PLA) for Panama for SDR 1.884 billion (500 percent of quota). of Panama, or about 2.5 billion dollars). Panamanian authorities have not fired on the arrangement and intend to continue processing it as a precaution. The PLL serves as insurance against extreme external shocks resulting from continued global uncertainties.
Panama’s economy recovered strongly in 2021 with the gradual easing of temporary lockdown measures as health and sanitary conditions improved. Real output grew by 15.3% in 2021, and the growth momentum is expected to continue in 2022, bolstered by the resumption of construction of a new metro line and improved private investment.
While Panama is able to meet its external financing needs under current conditions, the PLL arrangement provides insurance against external downside risks. Policy priorities under the LPL include boosting post-pandemic recovery, supporting an adequate level of spending on health and social needs, strengthening financial stability, and strengthening institutional policy frameworks that include financial integrity and data adequacy. Panama adopted the policies envisaged under the LPL agreement and continued to adhere to the modified fiscal rule that preserves medium-term debt sustainability. The authorities remain committed to continuing to strengthen Panama’s institutional frameworks, particularly with regard to the effectiveness of the AML/CFT regime, transparency of legal persons and legal arrangements, including beneficial ownership information. data adequacy and reporting of statistics, multi-year budgeting and financial sector regulation. and monitoring.
Following the Board discussion, Mr. Kenji Okamura, Deputy Managing Director and Chairman, made the following statement:
“The Panamanian economy has recovered strongly in 2021, driven by a rebound in domestic demand and rising copper exports, despite the continuing challenges of the COVID-19 pandemic and global uncertainties. The recovery is expected to continue in 2022, subject to significant risks, including global uncertainties stemming from the war in Ukraine, rising crude oil prices, tighter global financial conditions and new variants of the COVID-19 virus. Continued strong policies and engagement under the LPL will help mitigate vulnerabilities, strengthen the recovery and build market confidence.
“Panama continues to meet the PLL qualification criteria. Authorities intend to continue to treat the PLL arrangement as a precautionary device.
“The authorities are committed to the fiscal rule and gradual fiscal consolidation, which is essential to strengthen debt sustainability. Efforts to strengthen revenue mobilization and contain current spending, while prioritizing and appropriately targeting capital and social spending are important. Pursuing prudent policies and contingency planning would help mitigate risks to the budget. Measures to strengthen public financial management and budget transparency are also important.
“Measures to strengthen financial stability and improve financial integrity are essential to preserve Panama’s position as a regional financial center. Avoiding further delays in the implementation of the FATF action plan and the resulting reputational risks would favor an exit from the FATF gray list. Efforts to close the remaining gaps in the AML/CFT regulatory framework are essential. The authorities are taking steps to strengthen regulatory, supervisory and macroprudential policy frameworks. »
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