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From SNPedia

The Panamanian currency is officially the balboa, fixed at a rate of 1:1 with the United States dollar since Panamanian independence in 1903. In practice Panama is dollarized: US dollars are legal tender and used for all paper currency, while Panama has its own coinage. Because of the tie to US dollars, Panama has traditionally had low inflation. According to the Economic Commission for Latin American and the Caribbean, Panama's inflation in 2006 was 2.0% as measured by weight Consumer Price Index

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The balboa replaced the Colombian peso in 1904 after Panama's independence. Balboa banknotes were printed in 1941 by President Arnulfo Arias. They were recalled several days later, giving them the name "The Seven Day Dollar". The notes were burned by the new government, but occasionally balboa notes can be found in collections. These were the only banknotes ever issued by Panama and U.S. notes have circulated both before and since.