Panama Fiscal Room Shrinks as Canal Slot Costs Hit US$4 Million
Moody's affirmed Panama at Baa3 but warned its fiscal room is shrinking under 'special laws,' even as Panama Canal auction slots hit a record near US$4 million. The post Panama Fiscal Room Shrinks as Canal Slot Costs Hit US$4 Million appeared first on The Rio Times .
Panama's fiscal room is tightening as the cost of crossing the Panama Canal has surged, reaching around US$4 million per transit slot in 2026. Moody's, one of the major credit rating agencies, affirmed Panama's rating at Baa3, its lowest investment-grade level, on November 12-13, 2025, while issuing a negative outlook. The agency cited "budgetary rigidities" in Panama's laws that lock in spending, making it difficult for the government to cut costs when needed.
These special laws earmark funds for specific purposes, mandate automatic pay rises, and provide tax breaks, leaving the government with limited flexibility to reduce spending. The constraints include a fixed 7% of GDP allocation for education spending, among other commitments. The country's budget deficit reached a record 7.4% of GDP in 2024, but it has since improved to about 3.7% of GDP in 2025.
Meanwhile, the Panama Canal is generating record revenue from ships paying high fees for crossing. In 2026, a single transit slot sold for about US$4 million at auction, with some bids exceeding US$1 million. This revenue surge is due to increased traffic from the Red Sea and the Strait of Hormuz, as well as reduced daily crossings during drought years.
Despite the canal's financial success, Panama's budget remains constrained by the special laws, and unless these are relaxed, Moody's warns that the country's fiscal flexibility will continue to narrow.
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