IDB supports integrated risk management in Panama

$300 million loan to help improve risk management of macrofinancial financial shocks and natural disasters

The Inter-American Development Bank (IDB), has approved a loan for up to $300 million to the Ministry of the Economy and Finance of Panama to reduce the fiscal risk of macroeconomic, financial, and natural–disasters shocks by improving integrated risk management (IRM).

Resources will strengthen sovereign asset and liability management, as well as improve financial stability. To this end, the program is structured in three components; macroeconomic stability, strengthening of sovereign asset and liability management, and strengthening of financial stability.

Panama’s financial and trading links with the rest of the world are the strength of its economic model, but they also make it more vulnerable to external financial and macroeconomic shocks. The country is also vulnerable to natural disasters capable of causing heavy economic losses. The loan includes the formulation of a sovereign asset and liability strategy (SALM) and will strengthen financial regulation and supervision. The project will also formulate a proposal for a national disaster-risk financial management strategy, and the development of instruments allowing for public investment in reducing fiscal liabilities associated with natural disasters.

The IDB loan, will be executed by the Ministry of the Economy and Finance of Panama, is for a 20-year term, with a 30-month grace period and an interest rate based on LIBOR.