Stabilization Fund for Panama

Savings must be made and reserves accumulated during booms times, so that those funds can be used in times of national crisis or contraction.

Thursday, January 5, 2012

The creation of funds to build up currency reserves during periods of economic expansion from specific high-revenue sources, such as China's trade surpluses, Chile's copper or Norway's oil, is an option to be considered in Panama, which does not have a central bank to control monetary policy or act as a lender of last resort.

In the case of Panama, income generated by the Canal could be a suitable source for the formation of a sovereign stabilization fund which could contribute to maintain Panama's risk rating and a pension reserve fund, which would consolidate the finances of the Social Security Fund.

An article in Prensa.com looks at the benefits that funds of this nature would bring to Panama.

"In the early 1970's, Dr. Arnold Harberger, professor at the University of Chicago, was invited to Panama, to issue a series of lectures to staff at the newly formed Ministry of Planning and Economic Policy. In one of his lectures, Dr. Harberger said that in light of the absence of a central bank in Panama, a currency policy, and a lender of last resort, it would be in Panama’s interest for the government to create a National Stabilization Fund to deal with economic emergencies, whether in periods of economic slowdown or recession or in times of crises that could affect the banking system. "

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More on this topic

YES to Panama Savings Fund

May 2012

The Panamanian Chamber of Commerce supports the creation of a sovereign fund and recommends separate discussion of matters relating to limiting the fiscal deficit.

A statement from the Chamber of Commerce, Industries and Agriculture in Panama (CCIAP) reads:

The Chamber of Commerce, Industries and Agriculture of Panama, agrees with the establishment of a Savings Fund for Panama and recommends that the National Assembly have a separate debate over matters relating to the amendment to limit the fiscal deficit, which was incorporated into the bill creating the Fund.

The Lesson of Sovereign Funds

May 2012

Governments should act as good parents, thinking about the welfare of future generations, not just about the next election.

Governments should act as good parents, thinking about the welfare of future generations, not just about the next election.

In his article in Martes Financiero, Oscar Castaño Llorente discusses the rationale of the proposed creation of the Panama Savings Fund (FAP in Spanish), not only in its philosophical scope, but also from a practical point of view, present and future.

Sovereign Fund Approved in Panama

April 2012

The Fondo de Ahorro de Panamá (Panama Savings Fund) aims to be a mechanism for economic stabilization and savings for natural disasters or economic crises.

"The Cabinet has approved a bill proposing the creation of a sovereign fund called the ‘Fondo de Ahorro de Panamá ‘(FAP), which according to a statement from the presidency will have two parallel objectives: National savings for future generations and economic stabilization in case of predetermined situations such as natural disasters or economic crises," reported Capital.com.pa.

Honduran Central Bank to Issue $158 Million

August 2009

In an effort to protect international reserves, the Central Bank of Honduras will offer securities for $158.8 millions.

The bond issue will have a minimum $10.000 investment, and will pay a 3.5% interest rate.

After international reserves contracted $255 million so far in 2009, the bank decided to mitigate this by obtaining more funds.

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