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International Monetary Fund. Western Hemisphere Dept.
While Panama has been the most dynamic economy in Latin America over the last three decades (growing 6 percent on average), its strength is being tested by the COVID-19 global pandemic. Panama is a service-based economy that is highly integrated in the world economy and exposed to extreme shocks during the pandemic.
International Monetary Fund. Western Hemisphere Dept.
This paper focuses on Panama’s Request for Purchase Under the Rapid Financing Instrument. The coronavirus disease 2019 pandemic has disrupted Panama’s economy and created urgent balance of payments (BOP) and fiscal financing needs. The government has resolutely implemented measures to contain and mitigate the spread of the pandemic. However, significant uncertainties remain, and the economic fallout could intensify further if containment measures must be extended. The authorities stand ready to continue cooperating with the IMF in finding solutions to the balance of payments and fiscal imbalances. Measures have also been taken to maintain financial sector stability, including by allowing banks to use the accumulated dynamic provisioning to improve their liquidity position and absorb the impact of potential credit losses. The IMF emergency support under the Rapid Financing Instrument will help provide much needed resources to address BOP needs and support essential pandemic-related health expenditure. The support of other international financial institutions and development partners is crucial to close the remaining BOP and budgetary gaps, ease the adjustment burden, and preserve economic growth.