Panama has one of the strangest and simplest monetary systems in the world. You arrive expecting to exchange your money for some exotic Latin American currency, only to discover that the bills in your wallet look exactly like the ones you might have used in Miami.
Then someone gives you a strange looking coin with a Panamanian design.
You look at it.
It says “Un Balboa.”
You think you have accidentally received some kind of souvenir.
You haven't.
You have a dollar.
Panama's official currency is the balboa, named after Vasco Núñez de Balboa, the Spanish explorer associated with the European discovery of the Pacific from the Americas. The balboa was introduced in 1904 and has been fixed at exactly one US dollar ever since.
And this is where things get wonderfully weird.
Panama Has a Currency Without Its Own Paper Money
The balboa is the official national currency, but Panama does not have ordinary balboa banknotes circulating today.
Instead, Panama uses US dollar banknotes.
So if you withdraw $100 from an ATM in Panama, you will normally receive American dollars. If you buy lunch for $8, you pay with American dollars. If you pay your hostel bill, taxi fare or supermarket bill, you are generally paying with US dollars.
The balboa and the US dollar are fixed at 1 to 1.
One balboa equals one dollar.
One dollar equals one balboa.
There is no exchange rate to calculate and no daily currency conversion drama.
This arrangement has existed since 1904.
So What Does a Balboa Actually Look Like?
The easiest way to understand it is this:
Paper money = US dollars
Coins = a mixture of US coins and Panamanian coins
Panama's circulating coin denominations include:
1 centésimo
5 centésimos
10 centésimos
25 centésimos
50 centésimos
1 balboa
The values correspond directly to US coins.
A 25 centésimos coin is worth exactly 25 US cents.
A 50 centésimos coin is worth exactly 50 US cents.
A 1 balboa coin is worth exactly $1.
And this is why travelling in Panama can initially produce a strange experience at the cash register.
You might receive three American coins and two Panamanian coins as your change.
Nobody cares.
They're all money.
The Famous Panama Quarter
One of the easiest Panamanian coins to recognize is the 25 centésimos, which is equivalent to an American quarter.
Panama deliberately produced many of its coins to match the size and characteristics of corresponding US coins. That means a Panamanian 10 centésimos works like a US dime, a 25 centésimos works like a quarter and a 50 centésimos works like a half dollar.
So don't stare at your change wondering whether you've just been given counterfeit money.
That funny looking coin with Panama written on it really is worth 25 cents.
And yes, you can spend it.
The One Dollar Coin Is Particularly Interesting
Panama has a 1 balboa coin, worth exactly one US dollar.
It can look somewhat like an oversized US dollar coin depending on the issue, and different versions have been produced over the years.
The Banco Nacional de Panamá's catalogue includes circulating and commemorative one balboa coins, including issues connected with the 1999 Canal handover. Some were even struck by the Royal Canadian Mint.
So there is a delightful little international story hiding in your pocket:
A Panamanian coin celebrating Panama's Canal history, manufactured by Canada, circulating alongside American money in Central America.
Panama really is an international crossroads, even in your change.
There Are No $2 Balboas in Your Wallet
Technically, Panama has issued coins with much higher face values for commemorative and collector purposes.
The Banco Nacional catalogue includes commemorative coins denominated at $5, $10 and even $20 balboas, among others. But these are not the coins you will normally receive when buying a sandwich or paying for a bus.
For ordinary daily life, think:
US banknotes + Panamanian and US coins.
That's it.
The $1 Bill Is Your Friend
If you're travelling around Panama, don't be surprised if small businesses appreciate smaller bills.
A $100 note can be inconvenient when you're buying something for $2.
A $20 can sometimes be awkward for a tiny purchase.
A handful of $1, $5 and $10 bills is extremely useful for buses, taxis, small restaurants, shops, tips and roadside purchases.
And coins are particularly useful for small purchases.
This is one of those situations where having a wallet full of tiny pieces of metal suddenly becomes a superpower.
Panama Once Tried to Have Its Own Paper Money
Here's where the story gets fascinating.
Panama actually did issue its own balboa banknotes.
In 1941, the government established the Central Bank of Issue of the Republic of Panama and issued balboa notes in denominations including $1, $5, $10 and $20.
It didn't last long.
The political situation changed dramatically, the bank was closed and the notes were withdrawn. Most of the unissued notes were destroyed, and the issued notes became extremely interesting pieces of numismatic history.
So when someone tells you that Panama has never had a balboa banknote, that needs a tiny historical asterisk.
Panama did briefly issue them.
They just didn't survive as an ordinary circulating currency.
Today, if somebody hands you a genuine 1941 Panamanian one balboa note, you have something considerably more interesting than pocket change.
Why Doesn't Panama Just Print Its Own Money?
This is one of the most interesting questions about Panama.
Panama's monetary system is fundamentally different from most countries in Latin America.
There is no conventional Panamanian central bank issuing a national paper currency. Instead, Panama has maintained its long standing monetary arrangement with the US dollar, while its own currency exists primarily through coins.
There is an enormous practical advantage for travellers and businesses:
No currency conversion.
Someone arriving from the United States doesn't need to exchange money.
Someone doing business with American companies doesn't have to worry about the same sort of currency fluctuation that can occur elsewhere in Latin America.
And for tourists, it is wonderfully simple.
But There Is a Catch for Europeans and Canadians
If you're Canadian, European, British or Australian, Panama isn't necessarily a completely currency free experience.
You still have to deal with the US dollar exchange rate.
Your Canadian dollars become US dollars.
Your euros become US dollars.
Your pounds become US dollars.
So while Panama doesn't have a complicated local exchange rate, your home currency can still rise and fall against the dollar.
For Canadians especially, this means that a $20 lunch in Panama isn't necessarily “20 Canadian dollars.”
It is US$20.
That distinction can become rather important after several days of restaurants, taxis, tours, drinks and souvenir shopping.
Why Prices Sometimes Say B/. Instead of $
You may see prices written as:
B/. 5.00
or
$5.00
or simply:
5.00
Don't panic.
For everyday purposes, B/.5.00 means five balboas, which equals US$5.00.
The two currencies are fixed one to one.
So if you see a restaurant menu advertising something for B/.10, you're not about to discover that lunch costs some mysterious Panamanian fortune.
It's ten dollars.
The Balboa Has 100 Centésimos
Just as the dollar has cents, the balboa is divided into 100 centésimos.
So:
B/.1.00 = $1
B/.0.50 = 50 cents
B/.0.25 = 25 cents
B/.0.10 = 10 cents
B/.0.05 = 5 cents
B/.0.01 = 1 cent
You will hear people simply talk about centavos or cents in everyday conversation, but the formal subdivision of the balboa is the centésimo.
The Tiny Coin With a Big History
One of the strangest coins in Panamanian monetary history was the 2½ centésimos coin.
Yes.
Two and a half cents.
It was introduced in the early 20th century and became so small that it acquired nicknames including the “Panama Pill” and “Panama Pearl.”
Imagine trying to spend two and a half cents today.
You'd probably spend more time looking for the coin in your pocket than the coin was worth.
Panama eventually moved on to a more practical system.
The Canal Is Part of the Money Story Too
It is difficult to separate Panama's monetary history from the Panama Canal.
The country has always been heavily connected to international commerce, shipping, banking and the United States.
The decision to use the US dollar helped create an extraordinarily stable monetary environment compared with many countries that have experienced major currency devaluations.
And the irony is wonderful:
Panama is one of the most internationally connected countries in the Americas, yet its everyday monetary system is incredibly simple.
American paper.
Panamanian coins.
One to one.
What Should Tourists Actually Carry?
For travelling around Panama, a practical combination is:
US$1 bills for small purchases
US$5 and US$10 bills for everyday spending
US$20 bills for larger purchases
Some coins for very small transactions
And don't carry your entire holiday budget in cash.
Keep larger amounts secured and carry only what you reasonably need for the day.
Also remember that ATMs can sometimes give you larger denominations than are convenient for tiny purchases, so breaking a $20 or $50 at a supermarket or larger shop can be useful before heading somewhere rural.
And Then There Is the Great Panama Money Moment
Eventually, almost every traveller has the same experience.
You buy something.
You receive your change.
You look down.
There is a US quarter.
A Panamanian quarter.
A US dime.
A strange looking Panamanian 10 centésimos.
And a dollar coin.
You stare at them like you've just been handed pieces from four different countries.
Then you realize:
They're all worth exactly what they say they're worth.
Welcome to Panama.
It's one of the few places where you can walk around with US dollars in your pocket while technically using a currency named after a 16th century Spanish explorer.
And somehow, it all works.
The money may be international, but the change in your pocket is unmistakably Panamanian.