Panama Is Not on Ratings Review, and Fitch Already Calls It Junk

Panama’s public finances are improving and its credit rating is still in doubt. Both statements are true, and one widely reported detail is not.

A ratings review and a negative outlook are different things. So is investment grade at two agencies and junk at the third.

Moody’s rates Panama Baa3, the lowest investment grade notch, with a negative outlook.

Standard and Poor’s rates it BBB minus, also the lowest investment grade notch, with a stable outlook.

Fitch rates it BB plus. That is below investment grade, and it has been since March 2024.

So describing Panama simply as investment grade is wrong. It holds that status at two agencies out of three.

Moody’s completed a periodic review on 30 May 2026. The agency itself says a periodic review is not a rating action.

Panama is not on review or watch. A negative outlook signals which way a future move would go, and nothing more.

Moody’s sovereign vice-president Jaime Reusche spoke to a news agency on 8 September.

He said the agency is questioning whether Panama should keep its investment grade.

He also said Moody’s intends to resolve the negative outlook before the end of 2026.

Then he qualified it. The timing is now uncertain, because the government says no mining decision will come before year end.

That is a real signal of concern. It is not a formal review, and it should not be reported as one.

The finance ministry’s own report puts the non-financial public sector deficit at US$2.642 billion for January to July.

That equals 2.78% of gross domestic product. The same period last year was US$2.955 billion, or 3.27%.

So the deficit narrowed by US$313 million, an improvement of 10.6%.

There is a second and larger number. The central government deficit for the same period is US$3.371 billion, or 3.54%.

Anyone quoting a Panamanian deficit should say which measure they mean. The two differ by more than US$700 million.

Panama uses the balboa, pegged one to one with the US dollar, and the dollar circulates as legal tender. No conversion is needed.

Panama’s fiscal responsibility law sets a declining path for the broad public sector deficit.

The ceiling is 4.0% of GDP for 2025 and 3.5% for 2026. It falls to 3.0% in 2027 and 2.5% in 2028.

By 2030 the limit is 1.5%. The reformed schedule was published in October 2024.

At 2.78% through July, the country is inside the 2026 ceiling. Full-year figures are what count, and 2025 closed at 3.68%.

That was down sharply from 6.23% in 2024. The direction of travel is the government’s strongest argument.

Social security spending reached US$2.848 billion in the first seven months, up US$179 million on the year.

Interest payments came to US$1.732 billion. Those two lines are the bulk of the pressure.

A pension reform passed in March 2025 created a new capitalisation system with a solidarity guarantee.

Everyone hired from 18 March 2025 enters it. Existing members transition in 2036, so the savings are distant.

Debt is projected to settle at 66% to 67% of GDP by the end of 2026.

Cobre Panama is a roughly US$10 billion copper mine operated by First Quantum. It was ordered shut in late 2023.

It is still closed. The government says no reopening decision will come before the end of this year.

Moody’s frames the outcome as binary. Reopening could add more than 0.4% of GDP in royalties.

An adverse arbitration outcome could cost up to nineteen percentage points of GDP. That is the range the rating sits inside.

The canal is the other side of the ledger. Fees and dividends run at roughly 3% of GDP a year.

Canal income now supplies about 28% of central government current income, up from 13% in 2016.

The cabinet gave a favourable opinion on two new free trade zones on 8 September.

One is in La Chorrera in Panama Oeste, with investment of about US$1.95 million across two phases.

The other is in Cristobal in Colon province, at about US$18.78 million. The combined figure is roughly US$20.7 million.

More than 2,500 direct and indirect jobs are projected, a figure attached to the Colon zone.

These are modest sums, and the licences are issued by the free zones commission rather than by the cabinet itself.