Lawmakers Approve Panama Sovereign Wealth Fund

In Panama, lawmakers recently voted 41-19 to approve the development of a sovereign wealth fund. The fund would take effect after the Panama Canal’s $5.25 billion expansion is finished in 2014. The Panama Canal expansion started in 2007. It will have at least $300 million to start. This fund will help strengthen Panama’s financial safety net. The main objective of the sovereign fund is macroeconomic stabilization with a mandate to invest resources abroad.

The fund would be funded by revenue generated from an expanded Panama Canal.

Panama Finance Minister Frank De Lima communicated to lawmakers that estimated government savings will increase by about $1.5 billion per year from taxes on the canal.
The fund would only be tapped during recessionary periods or natural disasters.

Panama is currently a fully dollarized economy. They do not have a central bank or a lender of last resort.

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