Panama to trim taxes, tariffs to curb inflation

PANAMA CITY, March 1 (Reuters) - Panamanian President Martin Torrijos said on Saturday he planned a package of income tax cuts and reductions of import tariffs on some goods to put the brakes on rising inflation.

In a speech to the national assembly, Torrijos also raised the possibility of expanding a program of low-interest mortgages and offering incentives to farmers. He said the government would continue to subsidize domestic fuel and electricity.

Panama, which adopted the dollar as it national currency in 1904, has traditionally seen lower inflation than the United States. But rising international prices for oil and foodstuffs have increased inflationary pressures this year.

Economists worry that Panama's economy -- which has had one of the fastest growth rates in Latin America over the past three years -- now faces overheating.

Twelve-month inflation in Panama was 7.6 percent in January, driven by rises in food, housing and transport costs that are becoming a political issue as parties select their candidates for presidential elections in March 2009. (Reporting by Elida Moreno)