Panama to improve logistics sector with IDB support

$200 loan to strengthen institutions and improve competitiveness of logistics sector

The Inter-American Development Bank (IDB) has approved a US$200 million Policy-Based Loan (PBL) to Panama designed to improve competitiveness in the logistics sector by reducing regulatory and institutional restrictions.

The reforms supported by the project – which include regulatory, institutional, planning and trade facilitation initiatives – will help to boost value-added logistical services and the export of agricultural products, and support the expansion of trade with Central America through the ratification of international agreements.

The loan also will help with reforms to facilitate trade, reduce customs processing times for merchandise, and improve the human capital employed in the sector.

Transportation and logistics is the single largest sector of the Panama economy, accounting for 18 percent of the Gross Domestic Product in 2015. In the last five years, the sector grew by an average of 8.9 percent per year, and it is expected to continue being one of the principal engines of the country's development

The reforms supported by this loan are particularly timely and important to boost the benefits from the Panama Canal expansion, which will allow the passage of 10 to 102 Neopanamax ships and raise the average daily Canal crossings to about 40.

This is the second of three loans designed to assist with policy and institutional reforms along a programmatic path. The PBLs, awarded to borrowing members of the IDB, are distributed quickly as budgetary support. They do not assign resources to specific investments, and their disbursements are conditioned on verifying the agreed reforms.

The IDB loan is for a period of 20 years, with a grace period of 24 months and an interest rate based on LIBOR, and it has been approved by a cabinet decree of the Panamanian government.