Panama Forced to Look for Strategies to Reduce its High Debt

The challenge facing the next Government of José Raúl Mulino, which takes office on July 1, will be to generate confidence for investment.  Panama will be able to pay its debt only by reducing the size of the State, experts have stated. 

Reducing debt will depend on the ability to adjust the size of the State to the income obtained through collections, minimizing dependence on debt, as indicated by the economic consultant, René Quevedo.  He added that the challenge for the next government is to generate confidence in the climate for private investment, both national and foreign.  “Reducing debt in the short term will be difficult, since we have an oversized and “parasitic” state apparatus, inflated during the pandemic, which includes the highest state payroll in history, which, like subsidies, has been financed with loans,” said Quevedo. 

He added that in the short term, the Government faces a severe liquidity crisis in the economy, which is having a strong impact on consumption.  This is being caused by factors such as the fact that the Government still owes about 1.3 billion dollars to its suppliers and contractors.  Quevedo commented that new bank financing to the national productive sector between January and April 2024 was $1,274 million less than in the same period of 2019.