Moody's Maintains Panama's Investment Grade, Citing Economic Stability

Renzo Merino, Senior Vice President of Sovereign Credit Risk and Rating at Moody’s, stated that in the first nine months of the year, positive steps had been seen, especially in the budget debate and spending reduction; therefore, the downgrade of Panama should be a result of its actions in the face of its challenges. This rating means that Panama's debt obligations are of medium grade, i.e., its short-term payment capacity is 'acceptable'; thus, it maintains its investment grade, an essential requirement for investors to establish in the country, but faces challenges in fiscal consolidation due to low tax revenue and a tight budget. He detailed that the fiscal lottery, an initiative of the Ministry of Economy and Finance (MEF) aimed at eradicating tax evasion, has increased state revenues, growing from 40,000 invoices in its first draw to 1 million in the second held last October. Meanwhile, the Director of Financial Planning and Strategic Services, Eric Molino Ferrer, added that tax revenues are directly related to the level of employment in the country; a bet must be placed on its recovery through major infrastructure projects such as the construction of ports, a gas pipeline, metro lines, and a mine. Rating agency Moody's announced this week that it will maintain Panama's score at 'Baa3', a decision that, according to President José Raúl Mulino, projects the stability of the local financial system. Last September, Moody's executives assured that their projections for Panama were 'favorable'; however, they would remain vigilant of fiscal policies, budget execution, reactivation of productive sectors, debt containment, and institutional strength to make a decision on its rating. The president, during his weekly press conference, stated that this decision is 'extremely important and encouraging' because it reinforces the security of the Panamanian economy, drives investment attraction, and reinforces its validity before the world. 'This means that there is much more spending from all of us paying the 7% and it implies economic dynamism, even if some do not want to see it,' Mulino said. However, the Executive has implemented a series of measures to increase tax collection, mainly the Transfer Tax on Goods, Movable Property, and Services (ITBMS), which totaled $93 million until October, an increase of more than $20 million per month. Mulino once again requested the cooperation of the citizens: 'ask for your invoice' because in addition to winning a prize, they contribute to the rest of the Panamanians benefiting from the social projects that the Government develops in various sectors such as health, education, transportation, among others.