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Panama public finances: the fiscal rule, the budget, public debt and credit ratings

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Last verified: 2026-10-29 · Status: Changing

The fiscal rule caps the deficit of the non financial public sector (SPNF) on a falling path: 4.0 percent of GDP in 2025, 3.5 percent in 2026, 3.0 percent in 2027, down to 1.5 percent from 2030. It also anchors net debt at 50 percent of GDP within ten years. The 2025 deficit was B/.3,320.8 million (3.68 percent of GDP), inside the cap. Public debt was B/.59,349.3 million at end 2025, about 65.6 percent of GDP. The Constitution requires a balanced annual budget and bars the Assembly from raising spending without Cabinet approval; the 2026 budget totals B/.34,900.8 million. S&P rates Panama BBB- stable and Moody's Baa3 with a negative outlook.

Panama's currency, the balboa (B/.), is at par with the US dollar, which circulates as legal tender; the Superintendencia de Bancos states that the official currency is the balboa, whose value is on a par with the United States dollar (checked 29 October 2026). USD figures therefore equal the balboa figures.

Key facts

SPNF deficit cap 2026	3.5 % of GDPLey 34 de 2008 art. 10 (Ley 445 de 2024), as of 2026-01-01 · in force
SPNF deficit cap 2027	3.0 % of GDPLey 34 de 2008 art. 10 (Ley 445 de 2024), as of 2027-01-01 · pending
SPNF deficit cap from 2030	1.5 % of GDPLey 34 de 2008 art. 10 (Ley 445 de 2024), as of 2030-01-01 · pending
Net SPNF debt anchor (within 10 years from 2026)	50 % of GDPLey 34 de 2008 art. 11 (Ley 445 de 2024), as of 2026-01-01 · in force
SPNF primary surplus required from	2028 fiscal yearLey 34 de 2008 art. 12 (Ley 445 de 2024), as of 2028-01-01 · pending
Maximum duration of a fiscal rule exception	3 yearsLey 34 de 2008 art. 13 (Ley 445 de 2024), as of 2024-10-28 · in force
SPNF balance 2025	-3.68 % of GDPMEF Balance Fiscal preliminar diciembre 2025, as of 2025-12-31 · in force
SPNF deficit January to August 2026	3.56 % of estimated GDPMEF Balance Fiscal agosto 2026, as of 2026-08-31 · in force
Public debt, end 2025	59349.3 USD millionMEF Balance Fiscal preliminar diciembre 2025, as of 2025-12-31 · in force
Public debt to 2025 GDP (own calculation from MEF debt and INEC GDP)	65.6 % of GDPMEF debt / INEC nominal GDP 2025 (E), as of 2025-12-31 · in force
Weighted average cost of public debt, August 2026	4.66 %MEF Balance Fiscal agosto 2026, as of 2026-08-31 · in force
General State Budget 2026, total	34900.8 USD millionLey 494 de 2025 art. 1, as of 2026-01-01 · in force
S&P long term foreign currency rating	BBB- (stable) ratingMEF communiqué 22 September 2026, as of 2026-09-22 · in force
Moody's sovereign rating	Baa3 (negative outlook) ratingMEF communiqué 13 November 2025, as of 2025-11-13 · in force

The rule

1. The Executive prepares the General State Budget and the Assembly examines, amends, rejects or approves it. The budget is annual and covers all investment, revenue and spending of the public sector, including autonomous and semi autonomous entities and State enterprises, and the Executive's draft must balance spending with revenue. The Assembly may cut spending items (except debt service, other contractual obligations and investments already authorised by law) but cannot raise spending or add items without Cabinet Council approval, nor raise revenue estimates without a favourable opinion of the Comptroller General.Constitución Política de la República de Panamá (texto único, Gaceta Oficial 25176 of 15 November 2004), Art. 267, art. 268, art. 270 and art. 271, 2004-11-15 official text · verified 2026-10-29

2. If the budget is not voted by the first day of the fiscal year, the Executive's draft takes effect by Cabinet Council decision. If the Assembly rejects it, the prior year's budget is automatically extended, while debt service, contractual obligations and previously authorised investments in the rejected draft are deemed approved. The Assembly cannot repeal or modify revenue laws included in the budget without creating replacement revenue, after a Comptroller report, and no spending can be made unless authorised by the Constitution or law.
Example: A business relying on a budgeted public contract should check that the line survives the Assembly vote; if the Assembly does not vote by 1 January, the Executive's draft applies.Constitución Política de la República de Panamá (texto único, Gaceta Oficial 25176 of 15 November 2004), Art. 272, art. 273, art. 276 and art. 277, 2004-11-15 official text · verified 2026-10-29

3. Ley 445 de 2024 rewrote the fiscal rule of Ley 34 de 2008. Annual budget laws and their execution must keep any SPNF deficit on a declining path from the 2024 result toward 1.5 percent of nominal GDP (as computed by INEC): maximum 4.0 percent in 2025, 3.5 percent in 2026, 3.0 percent in 2027, 2.5 percent in 2028, 2.0 percent in 2029 and 1.5 percent from 2030. The SPNF excludes deposit taking public financial institutions, the Panama Canal Authority, Tocumen International Airport, ENA and ETESA.
Example: The 2026 cap of 3.5 percent of GDP: with the MEF reporting a January to August 2026 deficit of B/.3,387.0 million equal to 3.56 percent of its estimated GDP, that GDP estimate is about B/.95,140 million, so the full year cap is about B/.3,330 million. / About US$3.33 billion of deficit room for all of 2026.Ley 445 de 28 de octubre de 2024, which subrogates Chapter III of Ley 34 de 5 de junio de 2008 (Responsabilidad Social Fiscal), Ley 34 art. 10 (as replaced by Ley 445 art. 3); Ley 38 de 2012 art. 2 numeral 38 (as replaced by Ley 445 art. 10), 2024-10-28 official text · verified 2026-10-29 · changed: Ley 445 (Gaceta Oficial 30149-C, 28 October 2024, in force on promulgation) replaced the earlier deficit path with the 2025 to 2030 table and added a net debt anchor, a primary surplus rule and a new Fiscal Council.

4. Fiscal policy is anchored on net SPNF debt as a share of nominal GDP: the intermediate target is 50 percent or less within ten years counted from fiscal year 2026, then 40 percent over the following five years. Borrowing may only finance the Central Government's overall deficit and debt amortizations, save in fortuitous events or force majeure. The SPNF must run a primary surplus from fiscal year 2028.Ley 34 de 2008 as amended by Ley 445 de 2024, Art. 11 and art. 12, 2024-10-28 official text · verified 2026-10-29

5. The MEF may ask the Cabinet Council to suspend the rule and targets temporarily, with a substantiated exception report sent to the Comptroller, in a declared national emergency (maximum exception 1.5 percent of GDP or the emergency's cost, whichever is less) or in a slowdown: real GDP growth of 2 percent or less for two consecutive quarters, or tax revenue falling 10 percent or more in a fiscal year. The Assembly must approve the exception within 15 business days; it can last at most three consecutive years while growth stays below 2 percent.Ley 34 de 2008 as amended by Ley 445 de 2024, Art. 13, 2024-10-28 official text · verified 2026-10-29

6. Ley 445 created a Fiscal Council (Consejo Fiscal) as an independent technical commission that issues non binding opinion reports, including half yearly reports on compliance with the fiscal rule and targets in the budget and its execution, the medium term macro fiscal projections and the budget cycle.Ley 34 de 2008 Chapter VIII as subrogated by Ley 445 de 2024 art. 9, Art. 29-A and art. 29-B, 2024-10-28 official text · verified 2026-10-29

7. The Fondo de Ahorro de Panamá (FAP), the sovereign savings fund created by Ley 38 de 2012, accumulates Canal Authority contributions to the Treasury above a GDP threshold (art. 3 numeral 1) and may only transfer resources to the Treasury in defined cases such as declared emergencies or slowdowns (art. 5). Ley 445 suspended the art. 3 numeral 1 accumulation rule for fiscal years 2024, 2025 and 2026.Ley 38 de 5 de junio de 2012 (Fondo de Ahorro de Panamá); Ley 445 de 2024 art. 11, Ley 38 art. 3 and art. 5; Ley 445 art. 11, 2024-10-28 official text · verified 2026-10-29 · changed: Ley 445 de 2024 art. 11 suspended the FAP accumulation rule from Canal contributions for 2024 to 2026.

8. The 2026 General State Budget (Ley 494 de 29 de octubre de 2025, Gaceta Oficial 30397-A) totals B/.34,900,802,375 in revenue and spending across all institutional groups, of which the non financial public sector accounts for B/.30,072,828,374 and the Central Government for B/.21,922,254,252. Budgeted debt interest is B/.3,717,994,165 and debt amortization B/.4,463,137,340.
Example: Interest of B/.3,718.0 million equals about 10.7 percent of the B/.34,900.8 million budget. / About US$3.72 billion of budgeted interest in 2026.Ley 494 de 29 de octubre de 2025, que dicta el Presupuesto General del Estado para la vigencia fiscal de 2026, Art. 1, art. 2 and art. 3, 2025-10-29 official text · verified 2026-10-29

9. Results: the MEF reports an SPNF deficit of B/.3,320.8 million in 2025 (3.68 percent of GDP), below the 4.0 percent cap and B/.2,069.5 million smaller than in 2024; the Central Government deficit was B/.4,701.2 million (5.20 percent of GDP). For January to August 2026 the SPNF deficit was B/.3,387.0 million (3.56 percent of estimated GDP), with revenue up 10.2 percent and spending up 2.5 percent; the MEF expects to meet the 3.5 percent cap because Canal contributions and State company dividends concentrate in the last quarter.MEF, Informe del Balance Fiscal preliminar, diciembre 2025; MEF, Resumen Ejecutivo del Balance Fiscal, agosto 2026, Balance Fiscal del SPNF, 2026-10-14 official text · verified 2026-10-29

10. Debt: the MEF reports public debt of B/.59,349.3 million at end 2025, up B/.5,612.5 million in the year, including a B/.966 million solidarity contribution to the Caja de Seguro Social, B/.241 million of overdue preferential interest and more than B/.650 million borrowed early for 2026 amortizations. The weighted average cost of debt fell from 4.97 percent at end 2025 to 4.66 percent in August 2026, and debt growth is estimated at 5 percent for 2026.
Example: B/.59,349.3 million of debt against INEC's 2025 nominal GDP of B/.90,462.6 million is about 65.6 percent of GDP (gross, own calculation). / About US$59.3 billion of public debt.MEF, Informe del Balance Fiscal preliminar, diciembre 2025 (section D); MEF, Resumen Ejecutivo del Balance Fiscal, agosto 2026, Estructura de financiamiento, 2026-02-05 official text · verified 2026-10-29

11. Ratings: S&P Global Ratings affirmed BBB- (long term) and A-3 (short term), foreign and local currency, outlook stable, citing the 2024 fiscal rule reform and the March 2025 pension reform (MEF, 22 September 2026). Moody's affirmed Baa3 with a negative outlook (MEF, 13 November 2025) and in October 2026 assigned (P)P-3 to the Letras del Tesoro programme and (P)Baa3 to the Notas del Tesoro programme. The MEF reports that international holders of local Letras and Notas rose from US$974 million (August 2024) to US$1,312 million (September 2026).MEF communiqués on rating actions, Communiqués of 13 November 2025, 22 September 2026 and 19 October 2026, 2026-09-22 official text · verified 2026-10-29

Year	Maximum deficit (% of nominal GDP)	Outcome
2025	4.0%	3.68% (MEF, B/.3,320.8 million)
2026	3.5%	3.56% of estimated GDP to August (partial year)
2027	3.0%
2028	2.5%	Primary surplus also required
2029	2.0%
2030 onward	1.5%

Maximum SPNF deficit under Ley 34 de 2008 art. 10 as replaced by Ley 445 de 2024

Group	Total revenue = total spending
Non financial public sector	30,072,828,374
of which Central Government	21,922,254,252
of which decentralized institutions	10,724,841,755
of which public enterprises	1,709,092,529
Financial public sector	4,075,631,231
Other public sector entities	752,342,770
Total	34,900,802,375

General State Budget 2026 by institutional group (Ley 494 de 2025 art. 1, balboas)

Worked example

Reading the rule into a tender pipeline. If the 2027 cap of 3.0 percent binds and nominal GDP grows about 5 percent from the MEF's 2026 estimate of roughly B/.95,140 million, the 2027 SPNF deficit room is about B/.3,000 million (3.0 percent of about B/.99,900 million), smaller than the B/.3,320.8 million deficit of 2025. Expect capital spending, not debt service, to absorb the adjustment.
Debt service sensitivity. On B/.59,349.3 million of debt, each 0.1 percentage point change in the average cost is about B/.59.3 million (US$59.3 million) of annual interest; the fall from 4.97 to 4.66 percent between end 2025 and August 2026 is worth about B/.184 million a year on the end 2025 stock.

Step by step

1. Read the MEF monthly Balance Fiscal (published about six weeks after month end) to track deficit compliance; the Q4 Canal contribution and dividends change the picture late in the year.
2. For public contracts, confirm the project line in the budget law and its execution; art. 277 bars spending not authorised by law.
3. Watch the Fiscal Council's half yearly reports and any Cabinet request to suspend the rule under art. 13.
4. Track rating actions on the MEF news page; a move by Moody's from negative outlook is the next marker.

Common traps

Reading the 2026 August deficit (3.56 percent) as a breach. The cap applies to the full fiscal year, and the MEF expects year end revenue to close the gap.
Using Central Government figures for the rule. The cap applies to the SPNF, which excludes the Canal Authority, Tocumen, ENA and ETESA but includes the Caja de Seguro Social.
Assuming the Assembly can add projects. It cannot raise spending or add items without Cabinet approval (art. 271).
Treating debt to GDP figures from different sources as comparable. This page divides MEF gross public debt by INEC nominal GDP; the legal anchor is net SPNF debt, which deducts FAP assets.
Counting on FAP inflows from the Canal for 2024 to 2026. Ley 445 suspended the accumulation rule for those years.

Sources

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