Economists recommend fiscal discipline in order to better address the economic environment in the coming years and avoid the credit risk being raised due to increased borrowing.
The recent bond issue of state debt by $1250 million on the international market and the consequent increase in total public debt should be a wake up call for the government, which should be able to maintain an adequate balance in the relationship between debt and Panama's Gross Domestic Product.
An announcement has been made that in the short-term auctions of securities by Panamanian State will no longer be made in the local market and instead will be carried out through the Bloomberg platform.
Given the lack of investment in technology on the part of Panama stock exchange, the government has announced that it will begin making the auctions using the Bloomberg platform. The will allow for more transparent transactions by the State.
The proceeds obtained will be used to replace external with internal debt, via an exchange or payment for the global bond Panama 2015.
"Before the end of this year we want to do another operation for liability management. This will be based on what we have left to reduce from the 2015 global bond, a little over $900 million. We want to reduce a high percentage of it or if we can all of it," explained Dario Espinosa, Deputy Minister of Finance.
The U.S. could be facing a possible reduction in their risk rating, due to levels of national debt and government deficit.
Democrats and Republicans have been debating in the United States Congress trying to reach an agreement that will raise the debt ceiling and secure public finances for the future, avoiding a potential cessation of payments or a reduction in the country’s risk rating.
The country announced its first sovereign bond issue in the Japanese market.
"These securities, known as "samurai" will be placed among Japanese institutional investors, with the possibility of having a guarantee of up to 95% of the value of issuance by the Japan Bank for International Cooperation”, said the Panamanian Ministry of Economy and Finance in a statement to Invertia.com.
The Panamanian government intends to issue the bonds in the Japanese capital markets.
Alberto Vallarino, Panama's Finance Minister, commented that his government is seeking to diversify its sources of finance, as well as raise the country's profile in Japan and Asia.
The Japanese yen-denominated bond market is currently going through a period of growth and activity, according to an article on BusinessWeek.com, which also notes that Panama will pay less interest on its yen denominated bonds than on it dollar ones, even after taking into account exchange rate differentials.
According to a filing with the U.S. Securities and Exchanges Commission, the Canal country could sell up to $2.5 billion in bonds and warrants.
This decision could be motivated by a recent improvement in Panama's rating on behalf of Standard & Poors, who raised its investment rating outlook to "Positive", putting the country on the cusp of investment grade.
The Panamanian Government has reopened the 2015 global bond with a price of 101% which is equivalent to a yield of 7.041%.
La Prensa of Panama reported that the goal is "to cover funding requirements under the General State Budget 2009 Act."
According to Felipe Champan, managing partner of the Indesa Firm, the terms of the placement were positive: "While the price obtained is somewhat less than the recent quotes that were reported in the markets earlier this week, it is still attractive and effective cost for the country."