The Government of Panama taps the bond market (between US$ 2 billion and US$2.5 billion), and the IMF approves a PLL for the equivalent of US$2.7 billion

PANAMA - In Brief 20 Jan 2021 by Marco Fernandez

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There was good news for the Government of Panama's finances at the beginning of the year. First, the IMF Executive Directorate agreed to a two-year Precautionary Liquidity Line of Credit (PLL) of US$ 2.7 billion with the Ministry of Economy and Finance, with US$ 1,350 million available for the first tranche in 2021 for virus-related expenditures. Although the specific utilization of those funds does not appear in the IMF memo or the statements by the Government, the possible use of the money will be to finance expenditures related to the effects of the pandemic that hit Panama very hard: direct subsidies, the vaccination process, hiring of the workforce in the health services, among other activities. Minister Alexander is assuming also (correctly) that tax revenues will continue to lag during 2021, as considered in the budget. Additionally, Panama opened the 2023 and 2060 bonds at a tentative cost of Treasury plus 1.4% and Treasury plus 180 bps, respectively. The placement size could be US$ 2.5 billion, but depending on the demand in the market, it may reach a larger number. In fact, we believe it will.Our estimations of the gross financing needs for 2021 are US$ 6.9 billion (US$ 4.9 billion deficit financing and US$ 2 billion in amortizations). Given the gross requirements of at least US$ 6.9 billion for 2021, we assume that the MEF will tap the market again during the year. The IMF press release gave a seal of approval to the country's economic potential, which, in addition to the "liquidity window" in the dollar-based international market, suggests that there will not be significant difficulties filling the public's financial gap sector.However, the fundamentals of ...