The World Bank’s Board of Executive Directors has approved an innovative financing operation for Panama aimed at strengthening fiscal sustainability while facilitating the mobilization of private investment to support economic growth and job creation. By combining multiple World Bank Group instruments, the operation is designed to improve public financial management and enhance investor confidence in the country’s economic outlook.
The package includes a US$500 million Development Policy Loan focused on fiscal management and growth, along with two World Bank Group guarantees that will support a commercial loan of up to US$1.4 billion. These guarantees cover 95 percent of the loan and interest, allowing Panama to access financing on more favorable terms, generate fiscal savings, and strengthen the management of public debt.
Beyond financing, the Development Policy Loan supports a set of structural reforms aimed at boosting investment and improving fiscal discipline. These reforms include updates to the Fiscal Responsibility Law, measures to strengthen the pension system, improvements in tax administration, and the development of the local debt market. The operation also promotes reforms to facilitate public-private partnerships and expand 5G and broadband capacity in strategic areas, supporting productivity and competitiveness.
The financing structure reflects a milestone in the use of the World Bank Group’s Guarantee Platform, demonstrating how blended guarantees can unlock significant market financing while reducing borrowing costs. With a 25-year maturity and a two-year grace period, the loan and guarantee model provides Panama with long-term financial stability and a framework that could be replicated in other countries seeking innovative solutions to strengthen fiscal sustainability and attract private investment.
