Panama’s total public debt climbed to $58.9 billion in November 2025. The Ministry of Economy and Finance released the latest figures this week, showing a continued but slower pace of borrowing by the Central American nation.
The November balance of $58,904.6 million represents a monthly increase of $71.9 million. This modest 0.1 percent rise follows a period of much faster accumulation earlier in the year. Officials attributed the primary driver to new domestic debt issuance, specifically $228.2 million in Treasury bills placed at an average yield of 4.91 percent.
“Our deficit target is 4 percent, next year is 3.5 percent, and we continue downward from there… we expect to obtain the first primary surplus in almost 15 years,” said Minister of Economy and Finance Felipe Chapman in a recent interview. [Translated from Spanish]
Amortizations of internal and multilateral debt, combined with favorable exchange rate variations, partially offset the new borrowing. This resulted in the smallest monthly increase reported for 2025. The government’s stated strategy involves a gradual reduction of financing needs to engineer what Chapman calls a “soft landing” for the economy.
Slower Growth Masks Underlying Fiscal Challenges
November’s deceleration offers only limited relief. The nation’s public debt still grew by over $5 billion in the first ten months of the year. Based on official data, that pace equated to nearly $700,000 in new debt every hour during that period.
Market signals in November reflected ongoing pressure. Prices for Panama’s most liquid international bonds fell, pushing yields up by an average of 19 basis points. Local debt instruments saw yields rise by approximately 9 basis points, mirroring global interest rate trends. The cost of servicing this massive debt load remains a critical concern for fiscal planners.
Economist Carlos Arauz highlighted the severe constraint this imposes. He noted Panama now allocates over $3 billion annually just to pay interest on its debt. That staggering sum rivals or even exceeds the total income generated by the Panama Canal, sharply limiting the state’s capacity for other public investments.
“The Canal cannot hire a thousand more people because it does not need them, while the financial and insurance sector has been laying off personnel,” Arauz stated, questioning the link between macroeconomic growth and public welfare. [Translated from Spanish]
His analysis points to a deeper issue. The structure of Panama’s growth may not be translating into widespread prosperity.
Economic Growth Fails to Bridge the Prosperity Gap
Official statistics show the Panamanian economy expanded by a real 4.2 percent in the first nine months of 2025. Third-quarter growth came in at 3.9 percent. While positive, economist Carlos Arauz argues the country is still performing below its true potential, which he estimates at between 5 and 5.5 percent annual growth.
More importantly, he stresses that gross domestic product figures alone are poor metrics for national well-being. Dynamic sectors like the Canal, ports, and banking are largely capital-intensive. Their success does not automatically create formal jobs or raise household incomes for the average citizen. The recent strength in tourism, with hotels and restaurants reporting strong numbers, offers some hope for more labor-intensive expansion.
The core of the problem, according to Arauz, lies in an accumulated over-indebtedness over the past decade and a growth model reliant on widespread subsidies. He specifically questioned subsidies applied to construction, gas, electricity, and fuels. These policies create market distortions and may explain why many Panamanians do not feel the benefits of positive economic headlines.
Minister Felipe Chapman has acknowledged the need for subsidy review. He stated the government must verify aid is channeled to those who truly need it. The minister has not, however, announced plans to eliminate these supports entirely.
Arauz insists Panama must advance toward more solid fiscal discipline and sustainable growth. This journey will inevitably involve difficult decisions on tax exemptions, public spending, and strategic investments in logistics and human capital. True progress, he contends, is measured in education, health outcomes, and reduced surgical backlogs, not just debt-financed GDP figures.
The government’s immediate financial strategy continues to lean on domestic instruments. The recent issuance of Treasury bills provided necessary liquidity. Achieving the promised “soft landing” and a path to primary surplus, however, requires more than managing monthly debt flows. It demands a structural shift in how economic growth is pursued and who ultimately benefits from it.
Panama’s debt now stands perilously close to the $59 billion mark. The November report confirms that fiscal sustainability remains the country’s paramount economic challenge, even amidst a growing economy.