Panama Will Cut Debt to 35% of GDP, Minister Says

(businessweek.com) -- (Bloomberg) -- Panama will cut its public debt as a percentage of gross domestic product by 10 percentage points as the Panama Canal’s expansion boosts revenue and increased foreign investment generates royalties from mining, Finance Minister Alberto Vallarino said.

The Central American nation plans to slash its obligations to 35 percent of GDP from 45 percent by 2014 as collections from the upgraded canal rise to $5 billion a year from about $2 billion, Vallarino said. The government also plans to sell land and is “looking very carefully” at granting mining concessions to enhance revenue, he said.

“We recognize the responsibility of managing public finances,” Vallarino, 59, said today at a conference in Panama City. “Our country is on a very clear path to sustained growth.”

Panama’s credit rating was raised yesterday to investment grade by Fitch Ratings, which cited low debt levels and a resilient economy that posted one of the fastest growth rates in Latin America last year.

Fitch raised Panama’s foreign- and local-currency debt to BBB-, the lowest investment-grade level, up from BB+. The outlook on both ratings is positive, Fitch said in a statement yesterday. The country’s foreign-currency rating is in line with those of Brazil and Peru.

While Panama’s debt levels are lower than Brazil, the Central American country’s debt is mostly foreign-owned and vulnerable to shocks, said Roberto Sifon, an analyst with Standard & Poor’s.

“If you have a global crisis, foreigners pull out,” Sifon said in an interview today from Panama City.

Fitch forecasts the Central American country’s economy will grow an average of 5 percent a year, compared with a 2.4 percent expansion in 2009. The country’s debt was equivalent to an estimated 45 percent of gross domestic product last year, down from 70 percent in 2004, according to Fitch.

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Original Source: http://www.businessweek.com/news/2010-03-24/panama-will-cut-debt-to-35-of-gdp-minister-says-update1-.html
Date Retrieved: March 25, 2010.