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MEF will not ask to suspend the deficit cap

One day after Cabinet Resolution 108 authorised the Ministry of Economy and Finance (MEF) to seek a temporary suspension of Panama's deficit limits, the ministry said it will not use that option. According to Nexo and Infobae, which cite an MEF statement reported on Sunday 11 October, the 2026 fiscal target stays intact at 3.5% of GDP and quake costs should fit inside that ceiling. No statement was found on mef.gob.pa at factcheck time. That updates our Monday pack on the emergency resolution (Quake emergency lets Panama ask to bend its deficit cap), which correctly said Article 6 opened the door but could not yet say whether MEF would walk through it.

What MEF is saying

  • It will not ask the National Assembly for a fiscal dispensa (waiver) tied to the 9 October earthquake (Nexo, Infobae, citing the MEF statement).
  • Resolution 108 still allows special emergency contracting up to $100 million through 31 December 2026 (Gaceta 30631 / Monday pack). MEF stresses that figure is a ceiling, not an automatic spend (Infobae, citing MEF).
  • The law would have capped any waiver at 1.5% of GDP or the estimated emergency cost, whichever is lower (about $1,357 million if you apply 1.5% to 2025 GDP, a Nexo calculation). MEF says authorisation is not an obligation (Nexo).
  • Financing order of preference: insurance payouts, donations and non-reimbursable funds first; soft loans only if needed (Nexo; Chapman at the 10 Oct Cabinet briefing).
  • President Mulino also spoke of shifting spending from projects that can wait (Nexo).
  • Cumulative deficit January to July 2026 was 2.78% of GDP, leaving some room under the full-year 3.5% cap before the final damage bill is known (Nexo, citing MEF's fiscal balance).

What it means for expats

  • This is not a new tax. It is a signal that Panama wants to keep the published deficit path after Ecofin and the IMF review, which matters for credit ratings and, over time, bank and mortgage pricing.
  • Moody's still has Panama at Baa3 with a negative outlook (Nexo context). Keeping the rule does not decide that review, but it is the posture MEF wants markets to see.
  • The $100 million emergency-contracting window remains. Expect faster public repairs in Azuero, Coclé and Veraguas even without a deficit waiver.
  • Watch the next MEF fiscal balance and the damage inventory ministries send in. If costs blow past the room under 3.5%, the no-waiver line could change.

Sources

  • Nexo - MEF will not seek fiscal dispensa; 3.5% target intact; 2.78% Jan-Jul; funding order - 11 Oct 2026
  • Infobae - Panama discards fiscal dispensa a day after authorising the request - 12 Oct 2026
  • Gaceta Oficial - Edition 30631 (Cabinet Resolution 108) - 10 Oct 2026