Panama Is Not on Ratings Review, and Fitch Already Calls It Junk
Key Facts
- — What happened. A Moody’s analyst said the agency is questioning whether Panama keeps its investment grade.
- — The catch. Panama is not on review. It has carried a negative outlook since late 2024.
- — What the deficit is. US$2.642 billion through July, or 2.78% of GDP, against a legal ceiling of 3.5%.
- — What most reports miss. Fitch already rates Panama below investment grade, and has since March 2024.
- — The single biggest factor. The Cobre Panama copper mine is still shut, with no reopening decision this year.
- — What comes next. Moody’s wants to resolve the outlook before the end of 2026, but says the timing is uncertain.
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.
Where the Ratings Actually Stand
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.
What the Moody’s Analyst Said
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 Deficit Figure, and Which One It Is
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.
The Legal Ceiling It Has to Meet
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.
What Is Driving the Spending
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.
The Mine Everything Hangs On
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.
Two Smaller Items From This Week
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.
A separate report said the International Monetary Fund would review Panama in mid-September. We could not confirm it.
Panama has no IMF programme, so there is nothing to review in that sense. The last consultation concluded in July 2025.
Frequently Asked Questions
Has Moody’s put Panama on ratings review?
No. Panama carries a negative outlook dating from late 2024, and a completed periodic review is not a rating action.
Is Panama investment grade?
At Moody’s and Standard and Poor’s, at the lowest notch of each. Fitch has rated Panama below investment grade since March 2024.
How big is Panama’s deficit?
US$2.642 billion for January to July, or 2.78% of GDP, on the broad public sector measure. The central government figure is US$3.371 billion.
Why does the closed copper mine matter so much?
Reopening could add more than 0.4% of GDP in royalties. An adverse arbitration ruling could cost up to nineteen percentage points of GDP.
Sources: Panama’s finance ministry, fiscal balance report to July, Panama’s finance ministry, fiscal balance index, Infobae, the Moody’s analyst on the mine and consolidation, La Estrella de Panamá, Moody’s affirms Baa3 with negative outlook, Newsroom Panama, Fitch affirms BB plus, Swissinfo, the fiscal responsibility ceilings, La Estrella de Panamá, the two new free trade zones, International Monetary Fund, the 2025 Article IV consultation
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