IDB funds pandemic relief in Panama, Costa Rica

IDB funds pandemic relief in Panama, Costa Rica

Loans Economy & Policy Debt Coronavirus Panama Costa Rica Central America US

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The Inter-American Development Bank (IDB) has granted $400 million in financing for Panama and $250 million for Costa Rica to help counteract the economic effects of the COVID-19 pandemic in the two countries.

Both loans are in line with a rapid financing program approved by the International Monetary Fund (IMF) in April to cover emergency healthcare costs and contribute to macroeconomic stability in the medium term, the IDB said in separate press releases on Monday.

To receive the money, the Panamanian government agreed to implement measures to ensure a stable balance of payments and a sustainable public debt-to-GDP ratio. It also agreed consented to "ensure fiscal sustainability" after the healthcare crisis is over, the IDB said.

Costa Rica also agreed to lower debt and promote competitiveness in the country as a requisite for the loan, according to the IDB.

The two seven-year loans carry an interest rate based on Libor and come with a three-year grace period, the IDB said.

The IMF approved roughly $515 million in emergency funding for Panama in mid-April to handle the coronavirus emergency and fill part of a $3.7 billion gap in the balance of payments. In late March, the country sold $2.5 billion worth of 36-year notes, which allowed it divert funds from the budget to deal with the pandemic.

Before the coronavirus outbreak, Costa Rica issued $1.5 billion in 11-year bonds in November last year to ease financing pressures for the first quarter this year. It also discussed a stand-by agreement with the IMF to take off more pressure. Now the country plans to borrow up to $3.18 billion from multilateral lenders in 2020, equal to 5.2% of GDP, according to a report published in May by Fitch Ratings.

The IDB also said on Monday that it approved a $12 million loan for a 12-week cash transfer program for unemployed people in Belize with an emphasis on workers in the tourism sector.

Tourism accounts for roughly 40% of employment in Belize, but 95% of companies in the sector have been hurt by the COVID-19 pandemic, according to the IDB.