Credit rating agency Standard & Poor's (S&P) has reaffirmed Panama's investment-grade rating of BBB- with a stable outlook, citing the "progress" in fiscal consolidation and institutional strengthening driven by the executive branch, as reported on Wednesday by the Ministry of Economy and Finance (MEF).
Earlier, on March 28, 2024, Fitch downgraded Panama's investment grade, lowering the country's sovereign debt rating from BBB- to BB+, citing that the country's fiscal and governance challenges had worsened "due to the events surrounding the closure" at the end of 2023 of a large copper mine, which had once accounted for nearly 5% of GDP.
In November 2024, S&P also downgraded Panama's rating from BBB to BBB- with a stable outlook, pointing to weak fiscal revenues and the consequent increase in public debt and interest burden.
Fitch was the first agency to grant Panama an investment grade in March 2010. Moody's reaffirmed Panama's investment grade of Baa3 with a negative outlook on November 13 of last year, which Panamanian President José Raúl Mulino described as encouraging.
The last time Moody's changed Panama's credit rating was in October 2023, when it downgraded it from Baa2 to Baa3 with a stable outlook. At that time, Finance Minister Felipe Chapman noted that S&P's decision was predictable given the "deterioration of the fiscal situation" inherited from the government of Laurentino Cortizo (2019-2024), which received a debt of $26.612 billion and left it at $51.812 billion, according to official figures.
Additionally, "the expectation that Panama will preserve its macroeconomic stability, continue to increase revenue collection, and maintain sustainable debt levels in the medium term" was another decisive factor.
This outlook was changed to negative in November 2024. In a statement, the Panamanian finance ministry noted that "the adoption of a more prudent debt policy, focused on improving the maturity profile and the average cost of financing" also influenced S&P's decision.
