Panama’s water story is one of growing tension: repeated droughts are straining hydropower, urban supply, agriculture, and canal operations, while basin-level adaptation efforts are trying to keep the system resilient.
Panama links two oceans and depends on a globally strategic canal system. Yet repeated droughts and shifting rainfall patterns have turned water security into a central national challenge.
Panama stretches across a narrow isthmus shaped by 52 river basins and 500 rivers draining toward both the Caribbean and the Pacific. The country’s hydrography is structured in part by the Panama Canal Watershed, which connects the Chagres and Grande river basins within a single hydraulic system.
Part of this system feeds the locks, reservoirs, and urban supply. The rest supports hydropower, which remained Panama’s leading source of electricity in 2024 with 6.91 TWh generated, as well as drinking water for more than one million residents and the stored water of Gatun and Madden lakes, the canal’s main water reserves.
From a hydrological perspective, Panama appears water-rich, with about 35,000 cubic metres of renewable freshwater resources per person each year. The climate is tropical, with marked wet and dry seasons. Rainfall, however, varies greatly across the country, especially in the Arco Seco on the Pacific side, which receives much less precipitation and faces more frequent seasonal water deficits.
These contrasts help explain the vulnerability of Panama’s water system. The canal watershed has experienced several severe droughts in recent years. The 2023-2024 episode was considered the worst in more than 70 years, with rainfall about 43 percent below the historical average.
These low rainfall levels forced the Panama Canal Authority to restrict both vessel size and daily transits. Lake Gatun, the system’s main freshwater reserve, fell to historically low levels during the drought.
El Nino further worsened the situation by delaying the onset of the rainy season and reducing annual precipitation. In today’s warmer climate, this raises the likelihood of very dry years.
The impacts extend well beyond shipping. Drought affects agriculture, hydropower, urban water supply, and canal-related revenues. During the crisis, the canal reduced daily transits from 36 to 24 vessels, and some estimates projected revenue losses ranging from 150 to 200 million dollars.
Other Panamanian basins also face extreme rainfall, floods, landslides, and storms. This combination of water scarcity and hydrological extremes makes basin management increasingly complex.
Water governance is now adapting to this new reality. The Ministry of Environment, through its Water Security Directorate, leads integrated water resources management and coordinates basin, sub-basin, and micro-basin committees. By 2026, Panama had established 44 basin committees, 41 sub-basin committees, and 2 micro-basin committees.
Recent policy responses place greater emphasis on climate resilience. An Adaptation Fund-supported programme promotes integrated and climate-resilient water management in basins such as Chiriqui Viejo and Santa Maria, with particular attention to drought- and flood-prone areas like the Arco Seco.
At the same time, Panama’s PAGIRH (Plan de Acción para la Gestión Integrada de los Recursos Hídricos) 2022-2026 framework, led by the Ministry of Environment and supported technically and financially by UNEP through GWP Central America, aims to contribute to national water security by prioritizing concrete actions aligned with national priorities, climate-change scenarios, and the needs of different sectors. This framework uses the Parita River as a pilot basin to test financing mechanisms for water security.
To offset hydrological declines and maintain its economic activity, the Panama Canal Authority is also planning a new reservoir on the Indio River watershed to increase dry-season transits and strengthen drinking water supply.
Together, these measures connect local watersheds to national and global stakes. They aim to protect rivers, secure water for people and ecosystems, and keep the canal operating under growing climate pressure.
