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Panama Balance of Payments
Because of its domestic use of the United States dollar, Panama
had no short-term transfer problem and no foreign exchange
constraint. Capital flows and changes in the banking system's
foreign assets were less dependent on the current account than was
the case in other countries; these items responded mostly to the
government's fiscal situation and to conditions affecting
international banking.
Panama's balance of payments has always been characterized by
a large negative imbalance in its merchandise trade. In the 1970s,
this imbalance grew almost uninterruptedly, to a large degree
because of rising international prices for crude oil. In the 1980s,
the merchandise trade balance continued to be negative; in 1985
merchandise imports exceeded exports by US$904 million (see
table 17, Appendix A).
Panama's current account balance has been negative since the
1970s because of large deficits in merchandise trade. In 1982, the
current account balance registered a negative US$405.4 million and
the merchandise trade deficit was US$973.8 million. Since 1983,
Panama has had to adjust to its heavy external obligations, and the
current account, though still negative, improved to a negative
US$172.6 million in 1985. The current account has benefited from
the large surpluses in services (US$1.02 billion in 1985), which
have nearly compensated for the deficits in merchandise trade.
Transportation contributed the largest share to the services
surplus--US$384 million in 1985. Other sources of services income
included official transactions in the canal area, banking,
insurance, and shipping. One of the largest drains on the current
account was interest payments on the foreign debt.
In 1985 Panama experienced a net capital inflow of US$32.2
million and negative errors and omissions of US$136 million. The
foreign reserves in the banking system declined by US$134.7
million. Direct foreign investment in Panama fluctuated in the
early 1980s; in 1985, it totalled US$68 million. Panama was open to
foreign investment, although it restricted activities in retailing,
broadcasting, and mining.
Data as of December 1987
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