Historical Sketch

In 1501, the Spanish navigator Rodrigo de Bastidas was the first European to arrive at Caribbean shores of Panama. A decade later, Vasco Núñez de Balboa crossed the isthmus and arrived on the Pacific side. Spanish rule was established, the administration was done out of the Peruvian viceroyalty. After 1717, Panama became part of the Cundinamarca province of the newly created Viceroyalty of New Granada. During the 19th century, several attempts at secession were made, but independence of the territory from the Republic of Colombia only came in 1903 and with support from the United States. The Colombian parliament had rejected the treaty intended to pave the way to the construction of the Panama Canal. The US protectorate status was lifted in 1939, but the Canal Zone remained under US control until 1999, when the Panama refused to extend the lease contract.

Monetary History Overview

In June 1904, Panama and the United States concluded a monetary agreement in which the US Dollar became legal tender. The monetary law referred to the gold dollar as "Peso de Oro" to which Panama would issue subsidiary coins. The Panamanian constitution forbids the issuance of state paper money, in remembrance of the paper money inflation in Colombia of the late 19th century, so that until today only US paper money circulates. The currency name of Panamanian Balboa was mentioned for the first time in the 1917 currency law, referring to a silver coin of equal value to the US Dollar in gold. The first actual issue of a coin of this denomination happened in 1931. Panama does not have a full fledged central bank, selected supervisory functions are mandated to the National Bank of Panama, founded in 1904. In 1941, the Panamanian government attempted to break with the constitutional restriction and to gain control over the currency. A law was passed to establish the "Central Currency Bank" as central bank, and the production of paper money was commissioned. However, the government was overthrown one week after the start of the banknote issuance, and the entire action was stopped by the new government. The few issued banknotes were recalled and the entire production was incinerated in mid-1942. The planned central bank never opened for operations.

Panama joined the International Monetary Fund (IMF) on 14.03.1946.

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