Fitch prunes Panama

Fitch Ratings said it downgraded its ratings for Panama and its senior unsecured notes to BB+ from BBB-.

The lower ratings reflect governance and fiscal challenges worsened by the closure of the country's largest mine, the agency explained. The mine represents about 5% of the country’s GDP and its continued closure threatens the annual royalties the government receives.

“Large fiscal deficits and revenue underperformance have driven some of the largest rises in government debt/GDP and interest/revenues among peers since 2019 before the pandemic. This has constrained counter-cyclical policy space that was already more limited in the context of dollarization, and poses a greater vulnerability in light of the sovereign's heavy reliance on external markets for funding,” Fitch said.

Elections are scheduled for May and Fitch said it expects most of the likely winners will address the fiscal challenges.

The outlook is stable

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