Panama
- Total external debt:$9.8 billion (World Bank 2005)
- Total external debt payments: $2 billion (World Bank, 2005).
- Population: 3.2 million (World Bank, 2005)
- Percentage of adults who can read and write: 91.9% (HDR 2005)
- Average life expectancy: 75.1 years (HDR 2005)
- HIV prevalence: 0.9% (HDR 05)
- Total health spending: 5.2% of GDP (HDR 04)
- Total spending on debt service payments: 13.42% of GDP
- Annual GDP: $15.5 billion (HDR 2005)
DROP THE DEBT FAST
Panama is the focus of the Drop the Debt Fast on Friday 18 April. On this day in 1978, Panama was given back the rights to the Suez Canal by the USA.
Recent Political History
In 1821 Central America revolted against Spain and Panama joined the already independent Columbia. The following 82 years were characterised by political unrest as Panama attempted to break away from Columbia. As the US desired to have canal rights in Panama they eventually backed a break away from Columbia in 1903. The US paid a considerable sum for canal rights and in return was influential in Panama’s political affairs. After a series of puppet governments, Guillermo Endara was finally installed as President in 1990, and on 18 April 1999, the US formally handed over control of the Panama canal to Panama. The security of Panama has remained a concern, with Columbian rebels entering Panama’s territory periodically and increased arms and drugs smuggling occurring.
Challenges
Panama’s income classification belies the extreme inequality of the country, where a third of the population live in poverty, and 16% below $1 a day. Many of these people do not have access to basic services such as health and education.
Indigenous people in Panama make up 8% of the population and are isolated and hugely overrepresented in the poverty statistics. In 2003, 98.4% of those living indigenous areas lived in poverty, while 90% lived in extreme poverty.
Where has the debt come from?
Panama’s debt burden is largely made up of commercial debt, which is more expensive, and explains Panama’s extremely high debt service levels, paying back $2 billion in 2005. As an upper-middle income country Panama has less access to aid and concessional lending from other countries and institutions, despite the high levels of poverty and inequality, and the particular challenges facing the indigenous population, as outlined above.
Debt cancellation status
Panama is officially classed as an upper middle-income country by the World Bank. It is therefore not eligible for concessionary finance from IDA, the part of the World Bank that lends to the poorest countries, and so does not qualify for the Heavily Indebted Poor Countries initiative or the Multilateral Debt Relief Initiative. Nor is it eligible for additional debt relief from the UK or other bilateral donors. This is regardless of the size of Panama’s external debt in comparison to the value of exports, its domestic debt or what it needs to spend on tackling poverty.
The New Economics Foundation calculates that Panama requires 67% debt cancellation in order for the government to meet the basic needs of its citizens, such as health, education and infrastructure, without taxing those living below an ethical poverty line of $3 a day.
Information and sources:
World Bank country brief
Last updated: April 2008
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