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Borrowing at Home

Jan 1, 2005

Panama turned to the international markets to pre-finance spending for 2005. But when it's time to raise more money, it will stay closer to home.

When the Panamanian government raised $600 million on the international bond market in November, it did so to pre-finance its $1.1 billion budget gap for 2005. Instead of issuing more global bonds to raise a chunk of the remaining $500 million, the government says it will turn to the local capital market.

"Of the $500 million that we still have to raise, we've already contracted almost $140 million with multilateral lenders," says Aracelly Méndez, Panama's director of public credit. "The rest, about $300 million, will be raised on the domestic market." Of that, Méndez adds, some $250 million involves a refinancing plan since the government's first Treasury note issue falls due in July.

Traditionally, Panama has relied on international bonds to cover its budget deficit. "Now the government is refinancing domestic debt with more domestic debt and that lowers our cost...

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