The World Bank Group’s executive board has approved a comprehensive $1.9 billion financial operation for Panama. This package, confirmed on December 20, 2025, is designed to bolster the nation’s fiscal sustainability and support a series of structural economic reforms.
The operation combines a direct policy loan with two guarantees to facilitate more favorable commercial borrowing. It arrives as Panama’s government seeks to stimulate economic growth and job creation through updated fiscal policies.
A Three-Part Financial Support Structure
This financial package from the World Bank Group is structured around three core instruments. A $500 million Development Policy Loan forms the foundation, directly supporting fiscal management and growth-oriented policies.
Two separate guarantees will back a commercial loan of up to $1.4 billion. These include a $600 million Policy-Based Guarantee from the International Bank for Reconstruction and Development (IBRD). The second is a Sovereign Financial Obligations Guarantee provided by the Multilateral Investment Guarantee Agency (MIGA).
Together, these guarantees will cover up to 95 percent of the capital and interest on the commercial loan. This structure is intended to help Panama access financing on better terms, generate fiscal savings, and strengthen public debt management.
Reforms Supported by the Financial Package
Officials stated the public policy loan directly supports key government reform initiatives. A central pillar is the modernization of Panama’s Fiscal Responsibility Law to ensure long-term budget discipline.
Other targeted areas include strengthening the national pension system and improving tax administration. The operation also aims to develop the local debt market and facilitate public-private partnerships for major infrastructure projects.
Beyond fiscal measures, the program contemplates actions to expand 5G and broadband service capacity in strategic areas of the country. This dual focus on financial stability and digital connectivity underscores a broader development vision.
“This approval reflects the World Bank Group’s confidence in Panama’s commitment to fiscal discipline and transparency,” said Economy and Finance Minister Felipe Chapman. [Translated from Spanish] He added that accessing resources under better conditions sends a positive signal to international markets about the government’s determination to advance structural reforms.
Juan Pablo Uribe, the World Bank director for Central America and the Dominican Republic, called the operation a milestone. He said it lays the groundwork for more efficient and sustainable public management aimed at improving services and quality of life for citizens.
An Innovative Model for Middle-Income Nations
The combined use of loan and guarantee instruments represents a strategic innovation for the World Bank. Officials suggest this model could be replicated in other middle-income countries seeking to optimize their financing costs while pursuing reform agendas.
“The combined use of guarantees will reduce the country’s financing costs and support the long-term fiscal reform agenda,” said Ariane Di Iorio from MIGA. [Translated from Spanish] She described the scheme as innovative, with potential for application elsewhere.
The $500 million policy loan carries a 25-year term with a two-year grace period. This entire financial structure falls under the World Bank Group’s Guarantee Platform, a framework designed to expand sovereign financing options and attract private capital in support of public policy goals.
Panama’s government now faces the task of implementing the supported reforms. Market analysts will watch for the execution of the updated fiscal responsibility framework and the deployment of the guaranteed commercial loan. The success of this comprehensive package hinges on sustained political commitment to the outlined policy changes in the coming years.