{"id":13220,"date":"2026-05-11T11:52:00","date_gmt":"2026-05-11T16:52:00","guid":{"rendered":"https:\/\/expat-times.com\/panama\/?p=13220"},"modified":"2026-05-10T09:53:05","modified_gmt":"2026-05-10T14:53:05","slug":"el-salvador-and-panama-face-high-external-debt-risks-in-central-america","status":"publish","type":"post","link":"https:\/\/expat-times.com\/panama\/business-economy\/el-salvador-and-panama-face-high-external-debt-risks-in-central-america\/","title":{"rendered":"El Salvador and Panama Face High External Debt Risks in Central America"},"content":{"rendered":"

Countries across Central America<\/strong> maintain stark differences in how they manage their public debt. This situation directly influences economic stability and the capacity to respond to international financial crises. The latest fiscal report from the Economic Commission for Latin America and the Caribbean (ECLAC)<\/a> reveals these disparities in striking detail.<\/p>\n

The regional analysis shows Costa Rica ranks among economies with the most balanced financing structures. El Salvador and Panama demonstrate heavier dependence on international creditors. This reliance increases their exposure to external factors like rising interest rates, currency volatility, and global market conditions.<\/p>\n

\"panama<\/p>\n

Costa Rica leans on domestic creditors for stability<\/h2>\n

Costa Rica holds 74 percent of its state obligations with domestic creditors. Two-thirds of the debt remains in local currency. This composition reduces the impact of potential dollar fluctuations and strengthens the country’s fiscal management.<\/p>\n

The report also highlights that local government debt in Costa Rica<\/a> stays around 2 percent of Gross Domestic Product. Officials describe this as a moderate policy approach to subnational financial commitments.<\/p>\n

El Salvador faces vulnerable position with foreign creditors<\/h2>\n

El Salvador presents a distinctly different picture. Foreign creditors hold 68 percent of central government debt. Only 32 percent comes from internal financing. This composition leaves the country more vulnerable to sudden shifts in the international financial environment.<\/p>\n

Currency risk compounds the challenge. Most obligations sit in foreign denominations, amplifying exposure to exchange rate movements.<\/p>\n

\"banking
by https:\/\/www.flickr.com\/photos\/worldbank\/8262903776<\/figcaption><\/figure>\n

Panama shows high external debt but improving fiscal balance<\/h2>\n

Panama registers one of the highest external debt shares in the region. International creditors hold 82 percent of its commitments. Yet the report notes that 89 percent of that debt is denominated in national currency. This factor partially reduces risks tied to exchange rate variations.<\/p>\n

The country achieved significant improvement in its fiscal balance. Panama reduced its global deficit from -7.6 percent to -5.2 percent of GDP between 2024 and 2025. Revenue received a boost from extraordinary capital gains on securities sales. This activity stemmed from intense merger and acquisition activity across financial, industrial, and automotive sectors.<\/p>\n

Tax collection on payroll withholding grew as well, driven by stronger employer oversight. [Translated from Spanish]<\/p><\/blockquote>\n

Panama shows relatively positive compliance indicators compared to other analyzed countries. The global non-compliance rate reached 17 percent in 2023, the second lowest in the ECLAC sample. The fiscal impact of this gap equals 0.43 percent of GDP. That figure has declined from 0.71 percent recorded in 2018.<\/p>\n

A massive gap exists between employee and independent taxpayer compliance. Non-compliance among salaried workers and retirees sits at just 11 percent. Among independent workers, that number jumps to 77 percent.<\/p>\n

Guatemala and Honduras show more balanced approaches<\/h2>\n

Guatemala maintains a more diversified structure. Domestic creditors hold 55 percent of debt while external creditors hold 45 percent. This balance gives the country greater financial flexibility.<\/p>\n

Honduras shows relatively even distribution. International financing accounts for 52 percent of debt while national sources provide 48 percent. However, 63 percent of obligations are denominated in foreign currency. This increases exposure to international market volatility.<\/p>\n

Nicaragua leads region in external financing dependence<\/h2>\n

The report identifies Nicaragua as the Central America<\/strong>n country with the highest external financing dependence. International creditors hold 95 percent of its public debt. Domestic financing accounts for just 5 percent. This concentration significantly elevates risks during potential global economic crises.<\/p>\n

ECLAC warns that fiscal sustainability in Central America<\/strong> depends on governments’ ability to diversify financing sources. Strengthening fiscal policies and reducing external market dependence remain critical challenges. The public debt management Central America<\/strong><\/a> strategies will determine how well these economies weather future financial storms.<\/p>\n

The report comes as global interest rates remain elevated and economic uncertainty persists. Central America<\/strong>n finance ministries face mounting pressure to balance development needs with fiscal prudence. Each country’s debt composition tells a different story about its vulnerability and resilience.<\/p>\n","protected":false},"excerpt":{"rendered":"

Countries across Central America maintain stark differences in how they manage their public debt. This situation directly influences economic stability and the capacity to respond to international financial crises. The latest fiscal report from the Economic Commission for Latin America and the Caribbean (ECLAC) reveals these disparities in striking detail. The regional analysis shows Costa<\/p>\n","protected":false},"author":1,"featured_media":10243,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sitemap_exclude":false,"_sitemap_priority":"","_sitemap_frequency":"","footnotes":""},"categories":[30,28],"tags":[172,4231,1123,1670],"class_list":{"0":"post-13220","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business-economy","8":"category-news","9":"tag-central-america","10":"tag-debt-management","11":"tag-eclac","12":"tag-public-debt"},"_links":{"self":[{"href":"https:\/\/expat-times.com\/panama\/wp-json\/wp\/v2\/posts\/13220","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/expat-times.com\/panama\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/expat-times.com\/panama\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/expat-times.com\/panama\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/expat-times.com\/panama\/wp-json\/wp\/v2\/comments?post=13220"}],"version-history":[{"count":1,"href":"https:\/\/expat-times.com\/panama\/wp-json\/wp\/v2\/posts\/13220\/revisions"}],"predecessor-version":[{"id":13221,"href":"https:\/\/expat-times.com\/panama\/wp-json\/wp\/v2\/posts\/13220\/revisions\/13221"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/expat-times.com\/panama\/wp-json\/wp\/v2\/media\/10243"}],"wp:attachment":[{"href":"https:\/\/expat-times.com\/panama\/wp-json\/wp\/v2\/media?parent=13220"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/expat-times.com\/panama\/wp-json\/wp\/v2\/categories?post=13220"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/expat-times.com\/panama\/wp-json\/wp\/v2\/tags?post=13220"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}