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Panama External Debt
One of the major legacies of the Torrijos government was a
large external debt. In the 1970s, the government relied
increasingly on loans, essentially from abroad, to finance capital
investments. The external public debt increased from US$150 million
at the beginning of 1970 to US$774 million at the end of 1975.
External factors, such as the rise in oil price, were partly to
blame for the larger debt. By the end of 1978, Panama's external
debt was nearly US$1.9 billion, about 80 percent of GDP--one of the
highest ratios in the world.
In 1985 the external debt reached US$3.6 billion, or 73.5
percent of GDP, which on a per capita basis (US$1,636) was one of
the largest in the world (see
table 18, Appendix A). Most of the
debt (US$3.27 billion) was long-term in its maturity structure;
US$2.13 billion was owed to private creditors and US$1.14 billion
to official creditors (US$741 million to multilateral agencies and
US$403 million to bilateral sources).
Despite the high level of debt, the debt burden, as measured by
the ratio of total interest to GDP, fell from 8.0 percent in 1982
to 6.6 percent in 1985. Several factors helped Panama lower its
debt burden. These included the drop in world oil prices and the
decline in the average interest rate from a high of 11.4 percent in
1982 to 8.5 percent in 1985. In 1983 the government implemented an
economic adjustment program, which, from 1982 to 1985, slowed the
annual rate of foreign debt accumulation from 16.4 percent to 6.7
percent and cut the private creditors' share of long-term debt from
72 percent to 65 percent.
Panama has rescheduled its loans from international bank
creditors in 1983, 1985, and 1987. In September 1985, the Paris
Club (a financial consortium of Western financiers and governments)
also agreed to restructure US$19 million in principal repayments.
An estimated US$1.2 billion was due between 1987 and 1990. Although
the debt was still high in per capita terms, the lowered debt
burden enhanced the country's chances of successfully rescheduling
its loans.
* * *
The World Bank's Panama: Structural Change and Growth
Prospects (1985) is an in-depth analysis of Panama's economy,
with an emphasis on policy formulation. For comparative studies,
see John Weeks's The Economies of Central America and issues
of the Economist Intelligence Unit's Country Profile: Nicaragua,
Costa Rica, and Panama. For annual updates of economic activity
in Panama, see the Inter-American Development Bank's Economic
and Social Progress in Latin America, the International
Monetary Fund's Balance of Payments Statistics Yearbooks,
and the World Bank's World Development Reports. (For further
information and complete citations,
see
Bibliography.)
Data as of December 1987
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