BOOST: IMF Board Approves $2.7 Billion Line Of Credit To Panama For Pandemic Fallout

By OKELLO ALLAN

WASHINGTON|SHIFTMEDIA| The International Monetary Fund (IMF) has approved a $2.7 billion line of credit for Panama to address the coronavirus pandemic, the lender said in a statement on Tuesday.

The IMF’s executive board approved the two-year arrangement under its so-called precautionary and liquidity line of credit to serve as “insurance against extreme external shocks” that the pandemic’s economic fallout causes, the statement added.

The Executive Board of the International Monetary Fund (IMF) approved Panama’s request for a two-year arrangement under the Precautionary and Liquidity Line (PLL) for SDR 1.884 billion (500 percent of Panama’s quota, equivalent to about US$2.7 billion), which the authorities intend to treat as precautionary. The PLL will serve as insurance against extreme external shocks. stemming from the COVID-19 pandemic.

In 2020, Panama was severely affected by the global pandemic as containment measures significantly reduced economic activity, especially tourism. In addition, the country was hit by hurricane Eta and tropical storm Iota which curtailed a large part of the country’s agricultural production. As a result, the output is estimated to have dropped by 9 per cent, with the fiscal position deteriorating significantly amid revenue shortfalls and expenditure pressures.

While Panama is able to cover its external financing needs under present conditions, the arrangement provides insurance against downside risks. Policy priorities under the PLL include supporting an adequate level of spending on health and the social sectors during the pandemic, continuing strengthening further institutional policy frameworks, including financial integrity and data adequacy, and preparing the economy for the post-pandemic recovery.

The PLL was introduced in 2011 to meet more flexibly the liquidity needs of member countries with sound economic fundamentals and strong records of policy implementation but with some remaining vulnerabilities.

Following the Executive Board discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Chair, made the following statement:

“Panama’s sound macroeconomic policies have led to over three decades of dynamic growth. However, the impact of COVID-19 pandemic has caused considerable deterioration in the country’s macroeconomic situation and outlook. The two-year arrangement under the Precautionary and Liquidity Line (PLL) for 500 percent of quota (SDR 1.884 billion) will help the authorities’ economic recovery efforts against the pandemic, address outstanding vulnerabilities, and boost market confidence.

“Panama qualifies under the PLL, as it performs strongly in three out of the five qualification areas (external, fiscal and monetary) and does not substantially underperform in the other two areas (financial and data). It also meets the criteria for exceptional access. The authorities intend to treat the PLL arrangement as precautionary.