Law passed to support foreign exchange fee

Government has finally passed legislation to give authority to the two per cent Foreign Exchange Fee (FXF) that was implemented by the previous administration almost three years ago.

The Exchange Control (Amendment) Bill, 2020, which Minister in the Ministry of Finance Ryan Straughn said seeks to “validate” what was already being done, was passed in the House of Assembly today.

The FXF, which is charged at the point of sale on all transactions using foreign exchange, was implemented back on July 17, 2017 by the Democratic Labour Party (DLP) government, but the Exchange Control Act Cap 71 had not been amended as required.

Straughn stressed that the Government had to keep the fee in place at this time.

“If we were not in these circumstances that we are now, then we would have removed the two per cent foreign exchange fee, but we are not yet in a position to do so,” he said.

Explaining how the fee impacts residents, the Minister said: “For ordinary Barbadians, they will see the fee when they shop online. They will see the two per cent foreign exchange fee on their credit card bill . . . The two per cent gives a slight distortion as it relates to the exchange rate. . . because you know, Sir, that our foreign currency is normally traded between $1.98 and $2.02 in terms of the exchange rate. . . .Therefore, the two per cent has moved now from $1.96 to $2.04.”

Straughn further explained that it was only after Prime Minister Mia Mottley announced a relaxation in foreign exchange measures last year that it was subsequently discovered that the necessary legislation had not been prepared.

“We are now validating it. When the Prime Minister announced the liberalization last year, we found out as we did with almost everything from the last Government, that they didn’t even prepare the legislation to bring into fruition what it is that they announced.  The validation clause here is to obviously give legality to what was introduced,” he said.

As of August 2, 2019, the Government allowed residents to hold foreign currency accounts up to US$10,000.