Fondo de Ahorro de Panamá maintains strict rules for resource use

The Fondo de Ahorro de Panamá (FAP), the nation's primary sovereign savings mechanism, operates under strict regulations designed to preserve public resources while providing economic stabilization. Established in 2012, the fund serves a dual purpose: accumulating long-term savings for the state and acting as a tool during exceptional economic circumstances.

Resources can only be transferred to the National Treasury under three specific conditions: a declared state of emergency with costs equal to or exceeding 0.5% of GDP, periods of economic deceleration, or for the prepayment of sovereign debt. In the case of debt prepayment, transfers are limited to 0.5% of GDP annually, provided the fund's assets exceed 5% of the previous year's nominal GDP. Furthermore, assets must not fall below 2% of GDP during emergency or deceleration withdrawals.

The fund is managed through an irrevocable trust, with the Ministry of Economy and Finance as the settlor and the Banco Nacional de Panamá as the trustee. Its portfolio follows a diversified long-term strategy, with investment limits including up to 70% in sovereign bonds, 30% in corporate bonds, 30% in equities, and 15% in alternative investments and high-yield bonds. The fund is primarily financed by extraordinary contributions from the Panama Canal Authority and investment returns, though Law 445 of 2024 temporarily suspended contribution rules for the 2024-2026 fiscal years.