U.S. Suspends $26 Million in Aid for Panama

The Reagan Administration, escalating pressure on Panama to reduce military influence in governing the country, has suspended a $26-million aid program and told American diplomats to shun the powerful Panamanian defense chief, U.S. officials said Thursday.

The moves were the latest in an effort to show U.S. dissatisfaction with the behind-the-scenes rule of Panamanian Gen. Manuel A. Noriega, who has been accused by a former high-ranking military officer of complicity in the murder of an opposition figure as well as corruption and vote fraud.

The level of Administration ire rose considerably last month when an anti-American demonstration allegedly arranged by pro-Noriega factions caused an estimated $106,000 damage to the U.S. Embassy in Panama City.

Administration officials, speaking on condition of anonymity, said the aid freeze was instituted without fanfare after the demonstration and was to be lifted once Panama fulfilled promises to reimburse the United States for the embassy damage.

Now, the officials said, thought is being given to making the freeze continue even if restitution is made.

“This is clearly an attempt to destabilize my country,” said Aquilino Boyd, a special envoy sent by Panama to Washington earlier this month. “This is not what you expect when two countries are supposed to enjoy good relations.”

He predicted that the aid cutoff would boomerang against the United States by angering poor Panamanians who depend on U.S. development programs.

The suspension stops new contracts under an aid program worth $20 million in economic support and $6 million in military programs for Panama in the fiscal year ending Sept. 30. The Reagan Administration request to Congress for the next fiscal year was $33 million, which also would be halted if the suspension continues.

The Administration also turned down Panama’s request for the purchase of tear gas, which the country used in great quantities last month against anti-Noriega protesters.

In a more personal move, U.S. officials have been asked to limit participation in events at which Noriega is a participant.