Fitch affirms Panama

Fitch Ratings said it affirmed the Republic of Panama's long-term foreign- and local-currency issuer default ratings at BB+, short-term foreign-currency issuer default rating at B and the country ceiling at BBB+.

The outlook is stable.

The agency said that Panama's key rating weakness is its high level of public debt. Projected to be 34% by the end 2006, Panama's net public external debt/CXR ratio is among the highest of sovereigns in the BB category and its government debt/GDP ratio of 58% is significantly above the BB median of 40% of GDP. Fitch said a favorable maturity structure and the government's manageable financing requirement over the medium term offsets this risk somewhat.

While the approval of the Panama Canal referendum could yield positive results for the country in terms of higher external and fiscal receipts and improved GDP growth prospects over the longer term, its immediate impact on the sovereign's creditworthiness is constrained as uncertainties remain about debt financing, future revenues from tolls and Panama's ongoing fiscal consolidation, Fitch said.

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