Barbadians will be able to open foreign currency bank accounts here from July, as the Mia Mottley administration begins to loosen nearly five decades of foreign exchange controls.
The promise was first made last October.
Delivering her maiden Budget presentation in Parliament on Wednesday, Mottley argued that the 1970s-era foreign exchange controls were initially designed to regulate the flow of foreign exchange to ensure sufficient reserves to defend the exchange rate.
But, she said, with the advent of greater trade and globalisation, a consensus emerged that exchange controls, if not managed and administered well, could create distortions and can disrupt economic efficiency and growth.
Pointing out that several countries have been successful in relaxing their controls, Mottley boasted that Barbados’ international reserves were now close to the targeted 15 weeks, adding that Barbados’ exchange control regime has been cited by international competitiveness surveys as one of the critical impediments to doing international business.
The Prime Minister said: “Our efforts to cut bureaucracy and boost competitiveness will strengthen our reserves further. The switch from direct taxes to indirect taxes will support work and discourage imports, boosting our reserves.”
She also pointed to a number of planned investments that she said would also bring in foreign exchange in the short and medium term.
Mottley announced: “The time is now ripe for us to begin a gradual relaxation of exchange controls.
“Effective July 1 this year, we will allow all Barbadians to open foreign currency denominated bank accounts, to hold foreign currency they have earned here or abroad.”
She said the Central Bank would be gradual in the relaxation of the controls, and targeted in its approach: “We will focus first on those areas that boost investor confidence, lead to increased capital inflows, and better support economic growth by, for instance, allowing savings to be channeled to their most productive use.”
She also said there would be a reduction of the surrender requirement of 70 per cent of foreign exchange brought into Barbados.
“And the central bank will move it down I believe, to 50 per cent.”
The relaxation means that the central bank would allow foreign currency proceeds from the sale of assets to be repatriated in foreign currency or kept locally in a foreign currency account.
But these proceeds will not be subject to the capital appreciation policy, said the Minister of Finance.
During her presentation, Mottley also announced that her administration is to increase the annual limit on personal travel facilities from $7,500 to $20,000.
Other limits will also rise, she said.
“We will cap the foreign exchange fee at $100,000 so it does not become an impediment to doing business in Barbados,” she added, while insisting that the current reserve position and the macro-economic background now permit the liberalisation.
Prime Minister Mottley declared: “Our desire to do so, is driven by our genuine goal of being a global hub for business between Africa and the Americas, between Asia and the Caribbean. We will follow developments closely, and when the time is right, we will look to further relaxation. We are on our way.”