Bad jokes about Head of Panama City (6)
I believe the answer is:
skopje
'city' is the definition.
(Skopje is the capital of Macedonia)
'bad jokes about head of panama' is the wordplay.
'bad' is an anagram indicator.
'about' means one lot of letters goes inside another.
'head of' suggests taking the first letters.
The first letter of 'panama' is 'p'.
'jokes' with letters rearranged gives 'skoje'.
'skoje' enclosing 'p' is 'SKOPJE'.
(Other definitions for skopje that I've seen before include "place in Balkans" , "somewhere in Balkans" , "capital city" , "Capital of FYR Macedonia" , "Macedonian capital, joke PS (anag.)" .)