Located in Central America, Panama is an authentic country full of life, rich culture, and beautiful nature. It’s the land where the Northern and Southern worlds connect, and wild rainforests live in harmony with bustling cities. That said, it’s no wonder why so many people love traveling there.
Still, many travelers are confused when it comes to the currency of Panama, wondering whether they can use US dollars or need to exchange it for balboa. If you’re one of them, you’re in the right place. This article explores the currency of Panama. Plusc, you’ll get to know its economy and costs to better prepare for your trip.
The official currency of Panama is the balboa (PAB), and the rate of exchange for it has been tied to the US dollar, meaning one dollar equals one balboa. However, Panama doesn’t print its paper currency. Instead, it uses the US dollar as a legal tender.
Panamanian coins come in denominations of 1, 5, 10, 25, and 50-cent, are the same size, weight, and color as the US coins, and are used interchangeably. When shopping, you’ll likely see prices with either a “B/” or “$” on them - they have the same value, and you choose how you will pay.
You will find a portrait of the Spanish explorer and conquistador Vasco Núñez de Balboa on the heads of most coins, and all the tails feature the image of the shield of Panama, except for the 1-cent coin. Here, the tail shows an image of Urracá, an indigenous chief who fought historical battles with the conquistadors.
First introduced in 1904, the Panamian balboa replaced the Colombian peso following the country’s independence from Colombia. With the new-found freedom came the introduction of new silver coins. These came in denominations of ½, 2, 5, 10, 25, and 50 céntimos. Not long after, coins also came in 1/10, ¼, 1 ¼, and 1 céentimo, with size and composition resembling the US coins.
Occasionally, Panama commemorative coins in denominations of 5, 10, 20, 50, 75, 100, 150, 200, and 500 balboas have been minted to celebrate major milestones in the country’s history.
Since its inception, the Panamian balboa has been pegged to the US dollar at par, with a notable American military and political presence influencing the country’s currency since the construction of the Panama Canal in 1904.
President Dr. Arnulfo Arias enacted Article 156 of the Panamian Consitution in 1941, authorizing both public and private banks to issue private currency balboa banknotes. This led to the creation of the Central Bank of Issue of the Republic of Panama (el Banco Central de Emisión de la República de Panamá).
However, only seven days later, a military coup replaced Arias with Ricardo Adolfo de la Guardia Arango, with the new government shutting down the banknote issue, closing the bank, and ordering all 2.7 million banknotes issued to that date to be incinerated. Not many of these banknotes survived, making “Seven Days’ Notes” valuable collector’s currency.
In Central America, Panama has the highest gross domestic product (GDP) per capita. The US dollar gives Panama a competitive edge over non-dollarized countries in the region because other countries have to deal with the risks associated with exchange rates.
Panama’s Banco Nacional acts as the country’s financial agent and official depository of funds. However, it doesn’t regulate currency or issue paper notes. With virtually no government intervention, Panama’s dollarized system offers freedom to foreign investors, market-determined interest rates, and capital movements.
Essentially, Panama has a private monetary system where private banks and agents determine the stock of money due to the absence of a central bank. The unified currency system eradicates currency mismatches, foreign exchange risk, and speculative attacks expected in other countries with central banks.
Panama’s International Banking Center has been thriving for over 30 years. Currently, banking accounts for around 11% of Panama’s gross national product (GNP). And its success is largely attributed to low-interest rates, financial resources, high credit balances, and high liquidity fueling credit cycles.
A considerable portion of Panama’s income comes from the toll charged for using the Panama Canal. In 1821, Panama declared its independence from Spain and unified with Columbia, forming the Republic of Colombia.
82 years later, it declared its independence from Columbia too, and became a constitutional democracy. The US was criticized for promoting the separation because they were interested in reviving the failed French try at building a waterway between the Pacific and Atlantic oceans between 1881 and 1894.
In 1904, the US led the Panama Canal effort and finished it in 1914. To this day, the canal remains a crucial economic link for global trade.
Until the military challenged the Panamian government in the 1950s and 1960s, it was business-monopolized. In 1968, elections tainted by fraud and violence led the Panamanian National Guard to remove the elected president and provisional government.
In 1972, Panama passed a new constitution. However, a succession of corrupt governments and fraudulent elections kept it crippled. In 1987, the US intervened in Panama once again, imposing sanctions and invading it in 1989 to replace the government. In the 1990s, the country regained stability, maintaining it through the 2000s.
The Republic of Panama has experienced growth in the economy in recent years. However, unequal distribution of wealth remains. In 2016, the updating and expansion of the Panama Canal opened, continuing to supply a considerable portion of the income.
In smaller towns, your best bet is to have some cash on you. Banks are open from Monday to Saturday from 8 AM to 3 PM, but they tend to close earlier on Saturdays.
ATMs are also available and are the simplest way to get some cash. All you need to do is look for the signs that say Sistema Clave. They typically accept most credit and debit cards and charge a service fee of around $5. The cash amount you can withdraw at one time largely depends on the bank, but it’s usually around $500.
You won’t need to exchange money if you’re coming from the US because the US dollar is a legal tender in the currency of Panama.
However, you may have a hard time changing other foreign currencies. While you can exchange currency at the Banco Nacional de Panamá at the airport, you may find that the rates there are less than desirable. Besides the airport, you can change money at exchange shops, but these are hard to find outside the major cities. That said, your safest bet is to exchange your money in your country before traveling to Panama.
Panama isn’t expensive, with prices slightly higher than in other parts of Central America. Most restaurants in Panama serve set meals for around $4. Still, finer restaurants can get pricier. Taxis and buses are inexpensive, costing only a couple of dollars.
Hotels are fairly priced, with budget accommodations costing around $20 and midrange accommodations being priced between $50 and $100 a night. However, if you want to stay in the upscale hotel, expect to pay between $100 and $200. Note that sharing a room can significantly lower your travel expenses, as double rooms aren’t much more expensive than single rooms.
As we mentioned, Panama is a fairly inexpensive country, especially if you’re coming from Europe or North America. Your daily expenses in this country will largely depend on how you travel. If you’re staying in an upscale accommodation and eating in finer restaurants, you’ll spend significantly more than the budget tourist. Still, even deluxe accommodations are affordable to a degree.
Traditional breakfast costs around $3, while lunch and dinner cost a bit more. However, tourist-focused meals tend to be more expensive, costing between $8 and $15. A beer in a regular bar or restaurant is priced at $1 to $2, but fancier spots tend to double or even triple the price. Tap water in Panama is typically clean, but if you want to drink bottled water, you’ll pay around $1. Moreover, taxis are fairly cheap, costing only a few dollars.
Credit cards are typically accepted in cities. That’s especially true for finer hotels, shops, and restaurants. However, smaller hotels and restaurants usually take only cash. The same goes for taxis. Note that the farther you go from the city, the harder it is to use credit cards.
While Mastercard and Visa are the most widely accepted credit cards, you can use other cards in upscale facilities.
Still, in some parts of Panama, such as the Comarca de Guna Yala and other remote areas, you can’t use any credit card. That’s why it’s vital to have cash and small bills when traveling to these places, as you may have a hard time breaking larger denominations. Some of these areas won’t even have ATMs and banks, so prepare yourself before heading there.
In Panama, businesses rarely accept traveler’s checks as banks put a 45-day hold on checks before the merchants’ accounts are credited. Still, they can be cashed at some banks, though most banks cash only American Express checks. Also, they often charge a fee of around 1% of the check.
So, what is the currency of Panama? While the balboa is the official currency of Panama, the US dollar is a legal tender widely used across the country. Moreover, the only banknotes you can use in Panama are the US dollar bills, as there are no balboa notes.
That said, if you’re traveling from the US, you don’t have to exchange money. However, if you’re coming from another country, your best bet is to exchange your currency beforehand in banks or order your money online.
US First Exchange is an online spot where you can change your currency for almost any currency in the world, including exotic ones. All you need to do is to place your order, and we’ll take care of the rest.
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