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Panama: Staff Report for the 2011 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund
Published Date:
April 2012
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ANNEX 1. FUND RELATIONS

(As of November 30, 2011)

I. Membership Status: Joined: March 14, 1946; Article VIII

II. General Resources Account:

SDR Million%Quota
Quota206.60100.00
Fund holdings of currency (Exchange Rate)194.7594.27
Reserve Tranche Position11.865.74

III. SDR Department:

SDR Million%Allocation
Net cumulative allocation197.01100.00
86.75
Holdings170.90

IV. Outstanding Purchases and Loans: None

V. Latest Financial Arrangements:

TypeDate of ArrangementExpiration DateAmount Approved (SDR Million)Amount Drawn (SDR Million)
Stand-ByJun 30, 2000Mar 29, 200264.000.00
EFFDec 10, 1997Jun 20, 2000120.0040.00
Stand-ByNov 29, 1995Mar 31, 199784.3084.30

VI. Projected Payments to Fund 1/ (SDR Million; based on existing use of resources and present holdings of SDRs):

Forthcoming
2012201320142015
Principal
Charges/Interest0.050.050.050.05
Total0.050.050.050.05

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

VII. Implementation of HIPC Initiative: Not Applicable

VIII. Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable

IX. Implementation of Post-Catastrophe Debt Relief (PCDR): Not Applicable

X. Safeguards Assessment

Under the Fund’s safeguards assessment policy, the National Bank of Panama (NBP) was subject to the transitional procedures with respect to the Stand-By Arrangement, which was approved on June 30, 2000, and expired on March 29, 2002. The transitional procedures required a review of the NBP’s external audit mechanism only. The assessment was completed on July 12, 2001 and concluded that NBP’s external audit mechanism was at the time adequate.

Nonfinancial Relations

XI. Exchange Rate Arrangement:

Panama uses the U.S. dollar as the primary means of payment in the local economy. Its national currency (balboa) is issued in the form of coins only and serves as a unit of account. The exchange rate of the balboa is fixed at B 1 per U.S. dollar. Panama has accepted the obligations of Article VIII, Sections 2(a), 3, and 4, and maintains an exchange system that is free of restrictions on the making of payments and transfers for current international transactions.

XII. Last Article IV Consultation:

The 2010 Article IV consultation was concluded on July 12, 2010. Panama is on the standard 12-month consultation cycle. 2011 Consultation was delayed to align with the Financial Sector Assessment Program (FSAP) process.

XIII. FSAP: FSAP concluded in September 2011. It confirmed the banking sector’s strength and resilience to potential shocks, noting nonetheless that there data gaps prevent a full analysis of macro-financial linkages.

XIV. Technical Assistance:

Panama is a large recipient of technical assistance (TA) directly through the Fund or CAPTACDR. Latest assistance concentrated in the areas of the national accounts, both on output compilation and improvement of registering financial services. Assistance in the fiscal area included work on government financial statistics and steps necessary to implement requirements under the GFSM2001 manual. In the financial area, TA concentrated mostly on improving data compilation on a regional level, and of non-financial groups.

XV. Resident Representative: None.

ANNEX 2. RELATIONS WITH THE WORLD BANK-UNDER JMAP

TitleProductsProvisional Timing of MissionsExpected Delivery Date
Bank Work ProgramFirst Programmatic Management and Efficiency of Expenditures DPLNovember 2011April 2012 December 2011
Implementation of PanamaOctober 2011September 2016
Maritime Strategy
Enhanced Public SectorNovember 2011
Efficiency Technical
Assistance Loan
Metro Water and SanitationOctober 2011September 2015
Improvement Project Health Equity andDecember 2011June 2013
Performance Improvement
Project
Social Protection ProjectNovember 2011June 2012
Water Supply and SanitationOctober 2011May- 2012
in Low-Income Communities
Rural Productivity ProjectNovember 2011January 2013
Rural Productivity ProjectOctober 2011June 2013
(GEF)

ANNEX 3. RELATIONS WITH INTERAMERICAN DEVELOPMENT BANK

(As of December 2011)

1. In 2011, the IDB disbursed US$181.47 millions, of which, US$100 million correspond to budget support from the “Program of Reducing Vulnerability to Natural Disasters and Climate Change”. The Bank also approved US$220 million for four different sectors: an emergency loan for the flooding (US$20 million), health sector (US$ 50million), fiscal management (US$ 50million), and natural disasters and climate changes (US$100 million).

Panama: Relations with the Inter-American Development Bank(As of December 31, 2011, in millions of U.S. dollars)
A. Operations
SectorApprovedDisbursedUndisbursed Amounts
Sanitation234.082.2151.8
Education88.158.130.0
Urban Dev. And Housing30.06.523.5
Energy42.515.726.8
State Modernization100.427.073.5
Science and Technology19.78.810.9
Integration and trade4.74.10.6
Social Investment20.29.310.8
Capital and financial56.316.140.2
Transportation140.053.386.7
Environmental and rural Dev.68.144.623.6
Health50.00.050.0
Disaster Prevention120.0113.96.1
Total974.1439.5534.6
Source: IDB.
Source: IDB.
B. Loan Transactions
20072008200920102011 p
Disbursements74.9126.8216.8302.2190.4
Repayments8189.491.492.9107.7
Net Lending−6.137.4125.4209.382.7
Interests and Charges44.145.945.449.751.9
Subscriptions and Contributions1.6030.70
Net Transfer−51.8−8.577158.930.8
Source: IBD.
Source: IBD.

ANNEX 4. STATISTICAL ISSUES

1. Progress has been achieved in improving the accuracy, timeliness, and publication of economic statistics. Data provided to the Fund are generally adequate for surveillance. However, there is a need to address methodological weaknesses in foreign trade calculations and to improve the consistency between the national accounts and the external sector accounts. Panama has participated in the Fund’s General Data Dissemination System (GDDS) since December 2000. However, the metadata and plans for improving the statistical system that are posted on the Dissemination Standards Bulletin Board (DSBB) need updating. Following an SDDS assessment mission conducted by the Statistics Department in April 2011, the authorities agreed on a work program aimed at meeting the requirements for Panama’s subscription to the SDDS. The work program envisages that Panama could become an SDDS participant by 2013,

Real Sector

2. National accounts data are released with a lag of approximately three months. The index of monthly economic activity is released with a lag of up to two months. Although the timeliness of real sector data provision has improved, the data are often subject to sizable revisions. The World Bank is supporting a project for changing the base year of the national accounts to 2007, which started in the second half of 2010 and should be completed in early 2012.

3. A population census was conducted in May 2010 and results were published in 2011.

4. The IMF national accounts technical assistance mission conducted in 2010-11 noted slow progress in expanding coverage of financial activity as well as the overestimation of the deflator used to calculate the financial services output at constant prices.

5. A new Household Income and Expenditure Survey was conducted during 2007-08, and the National Institute of Statistics and Census the base, basket, and weights of the CPI.

Government Finances

6. The Ministry of Finance compiles budget execution data for the central government and data on nonfinancial public sector operations (central government, public enterprises, and agencies) on a cash basis. Monthly and quarterly data have been reported up to November 2011 for the budgetary central government operations (www.mef.gob.pa).

7. Further efforts are needed to improve the quality of fiscal data. Apart from timeliness, data consistency in terms of transfers between public sector units should be improved; and the coverage of the public enterprises should be made universal. Since September 2004, the operational balance of the Panama Canal Authority (ACP) was excluded from the official definition of the nonfinancial public sector used for fiscal policy purposes. Information on the ACP is only available in the Annual Report posted in its website (www.pancanal.com) on a fiscal year basis. There is a need to ensure a consistent and timely flow of ACP statistics on a calendar year basis. Moreover, in 2011, three public enterprises have been excluded from the NFPS accounts and public debt. It would also be necessary to timely compile and disseminate information on these entities. The authorities are receiving technical assistance from Statistics Department (STA)/Central America Technical Assistance Center (CAPTAC) to implement the government Finance Statistics Manual 2001 (GFSM 2001) and Fiscal Affairs Department (FAD) conducted a mission on observance of fiscal standards and codes (ROSC) in October 2005. The authorities, however, cannot elaborate fiscal statistics in accordance with GFSM 2001 without a priori reforming the public accounting and adopting accrual accounting under International Public Sector Accounting Standards (IPSAS). In 2011, FAD assessed Panama’s progress in implementing Single Treasury Account and improving government accountability and internal audit. While the authorities took important steps in improving these areas, further work would be needed to achieve compliance with international best practices.

Monetary Accounts

8. Panama has been publishing financial sector data based on the new standardized report forms (SRFs) for monetary statistics in the International Financial Standards Supplement since March 2007 and participates in a regional project for harmonizing monetary and financial statistics in Central America and the Dominican Republic, supported by CAPTAC. The aim is to facilitate cross-country comparison and regional analysis. Provision of monthly data by the two public financial institutions, the National Bank of Panama and the Savings Bank (Caja de Ahorros), is regular and prompt. Monthly data on the operations of the domestic and international commercial and savings banks is prepared by the Superintendency of Banks, and posted on its website (www.superbancos.gob.pa) and reported to STA with a lag of one to two months. The state-owned development banks, the Agricultural Development Bank, and the Mortgage Bank are not regulated by the Superintendency of Banks and no data are reported to the Fund.

Balance of Payments

9. Weaknesses in foreign trade flows calculations, particularly in those involving the Colon Free Zone, need to be addressed. Substantial changes in the composition of trade flows over the last decade render the current methodology to estimate volume indices obsolete. Quarterly data is available with a delay of about one quarter, and is subject to revisions thereafter. Revised estimates in key trade and investment data may result in substantial revisions of the current account of the balance of payments. These revisions may reflect improvements in coverage, but they also suggest that there is room for improvement in quality control procedures. Data are not yet available on nonfinancial private sector debt and transactions involving financial derivatives, resulting in large swings in errors and omissions. Quarterly International Investment Position (IIP) data have been compiled since 2002, and annual data are available since 1998.

Panama: Table of Common Indicators Required for Surveillance(As of November 30, 2011)
Date of latest ObservationDate ReceivedFrequency of Data6Frequency of Reporting6Frequency of Publication6Memo Items:
Data Quality- Methodological Soundness7Data Quality- Accuracy and Reliability8
Exchange RatesFixedNANANANA
International Reserve Assets and Reserve Liabilities of the Monetary Authorities110/201111/2011MMA
Reserve/Base MoneyNANANANANANA, O, NA, LOLO, O, O, O, NA
Broad Money10/201111/2011MMM
National Bank of Panama Balance Sheet10/201111/2011MMA
Consolidated Balance Sheet of the Banking System10/201111/2011MMM
Interest Rates210/201011/2011MMM
Consumer Price Index11/201012/2011MMMO, LNO, LO, LOLO. LO. LO. O, LO
Revenue, Expenditure, Balance and Composition of Financing3 - General Government49/201111/2011QQQLO, LNO, LO, OO, LO, LO, LO, LO
Revenue, Expenditure, Balance and Composition of Financing3-Central Government9/201111/2011QQQ
Stocks of Central Government and Central Government-Guaranteed Debt510/201111/2011MMM
External Current Account Balance9/201112/2011QQQLO, LO, O, LOLO, O LO, LO, LNO
Exports and Imports of Goods and Services9/201112/2011MMM
GDP/GNPQ2/20116/2011QQQO, O, O, LOLO, LO, LNO, LO, LNO
Gross External Debt10/201111/2011MMM
International Investment Position 920106/2011AAA

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Irregular (I); Not Available (NA).

Reflects the assessment provided in the data ROSC, published in October 2006 based on the findings of the mission that took place during February 7-23, 2006. For the dataset corresponding to the variable in each row, the assessment indicates whether international standards concerning (respectively) concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).

Same as footnote 7, except referring to international standards concerning (respectively) source data, assessment of source data, statistical techniques, assessment and validation of intermediate data and statistical outputs, and revision studies.

Includes external gross financial asset and liability positions vis-à-vis nonresidents, including of offshore bank.

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Irregular (I); Not Available (NA).

Reflects the assessment provided in the data ROSC, published in October 2006 based on the findings of the mission that took place during February 7-23, 2006. For the dataset corresponding to the variable in each row, the assessment indicates whether international standards concerning (respectively) concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).

Same as footnote 7, except referring to international standards concerning (respectively) source data, assessment of source data, statistical techniques, assessment and validation of intermediate data and statistical outputs, and revision studies.

Includes external gross financial asset and liability positions vis-à-vis nonresidents, including of offshore bank.

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