Welcome Remarks
Governor John Rolle
Seminar on Exchange Control Liberalisation and Future Developments
5 February, 2017
The Central Bank is pleased to welcome participants to today's seminar on the
administration of Exchange Controls (EC) in The Bahamas. This event is being held to
provide more information on the recent liberalisation measures. We seek to promote
better awareness of the distinction between exchange controls current account or
traderelated transactions versus those on capital and financial flows. This has a bearing on how
discussions about liberalisation of international financial flows could be approached. We
also expect to receive constructive feedback on how the various administrative processes
can be further improved.
Over time the Bank expects that our focus will narrow to just those issues related to capital
and financial flows and how these can be managed for the benefit of the economy. The
Bank anticipates a further rapid shift in delegated responsibility to commercial banks to
process foreign currency applications for trade-related payments. This will leave more
space on our work agenda to explore and prepare for relaxation of capital flows.
It should be stressed though that The Bahamas is not presently in the position to make a
large leap to more liberalised, unfiltered financial flows, such that the stability of our
exchange rate would be preserved. This is especially so considering the very liquid nature of
flows to which some stakeholder groups aspire. Preparation is still required to strengthen
our institutional capacity to function in a transformed environment, and to improve the
structural health of the economy.
Some of our important stakeholder groups do not yet fully acknowledge the trade-offs that
could be involved between the extent of liberalisation introduced, and difficulty it would
pose to preserve the fixed exchange rate. Also, The Bahamas has not built the sufficiently
informed national consensus on what the final state should look for either liquid flows or
direct investments. "Informed consensus" means that the positions adopted should be
based on proficient understanding of how the economy is structured; the nuts and bolts of
how the economy works; how foreign exchange gets from where it is earned to where it is
needed; and how, in the absence of capital controls, pricing mechanisms could dictate how
foreign exchange gets allocated.
But the messaging seems clear: we want less administrative involvement of the public
sector in the commercial activities of the private sector, balanced with the objective of
keeping the outcomes stable.
How does the central bank fit into this process?
In our Strategic Plan for 2016-2020 the Bank mapped out goals to pursue a constructive
approach with both internal and external stakeholders to improve the administrative
processes for Exchange Controls. This includes a focus on promoting more informed
dialogue on capital and financial flows and on how these relate to an understanding of the
way our economy works. Our Financial Literacy program will support this process. We also
believe that literacy will encourage more transparency and accountability on policies and
fundamentals over which we have control. It will better equip the private sector to ask
pointed, relevant questions of policy makers.
Our dialogue has to draw out the importance of holding policy makers accountable to
inspire confidence through the outcomes that they produce. In this regard, the degree of
success achieved with liberalisation ought to be gauged by the extent to which private
sector decisions around the deployment of capital is based on genuine pursuit of higher
productive returns rather than a fear of erosion of wealth from real or perceived risks of
domestic economic ruin.
Fear is still too prominent in the discussion for wanting to go outside. As such the private
sector's decisions could be underweighting the returns that their capital would generate in
productive investments inside The Bahamas. This point should not be downplayed given
already significant liquid resources that lay idle in local banks. These resources and others
are in need of greater deployment in the enterprise sector. New private sector mechanisms
ought to be developed to deploy these resources.
The Central Bank does believe that more benefits can be obtained from liberalisation.
Prudent reforms should continue to be advanced to put these advantages within the reach
of the economy. The Bank has stressed though that liberalisation should be gradual. After
all, the process of developing the systems and capacity to manage a transformed economy
is itself gradual.
With these points in mind, the Bank trusts that you will find today's seminar useful. We
look forward to your constructive input.
Thank you.