Bahamas News

Minister of State for Finance Zhivargo Laing says the Ingraham Administration will tread cautiously as they seek to abolish exchange controls in The Bahamas within the next five years, and explained why his government believes the system needs an overhaul.

Minister of State for Finance Zhivargo Laing says the Ingraham Administration will tread cautiously as they seek to abolish exchange controls in The Bahamas within the next five years, and explained why his government believes the system needs an overhaul.

Exchange controls, whose regulations were relaxed by the previous administration, and periodically over the years, have been under close scrutiny for some time.

Economists within the country have noted the drawbacks the controls pose in terms of discouraging investors who operate within the Bahamian economy from taking part in the world economies outside The Bahamas.

While the FNM is confident the abolition of those controls – put in place by the Central Bank of The Bahamas in 1974 – will occur within this political term, Mr. Laing said recently that no specific schedule has been set.

In an interview with The Bahama Journal, Mr. Laing clarified why his government feels it is time to reform the long-standing economic system.

“You have to agree that all of the economic opportunities that exist for your citizens and for people who operate from within your economy – are not within your economy – and they exist elsewhere,” said Mr. Laing.

“So the extent to which you discourage them from taking advantage of that opportunity because you put a penalty on that outward flow is the extent to which you deny them that economic opportunity.”

“So there are opportunities to be had by a more liberal exchange rate policy for outward investment and seizing the returns that those investments could have,” the minister said.

Exchange controls are typically various forms of restrictions imposed by a government on the purchase or sale of foreign currencies by residents or on the purchase or sale of local currency by nonresidents.

Mr. Laing said there could also be opportunities in the way of accessing foreign currency at a lower interest rate for Bahamians and those that operate within the Bahamian economy.

He added that the government must tread carefully as they go about changing economic systems that have been in place for decades.

“You cannot do something like that without having regard for the fact that the exchange control that you have in place today exists for a reason and has served you well. So only when you no longer need it to serve you in that way would you consider doing this so that you could benefit these opportunities that people might have,” he said.

“It serves a purpose, there’s no question about that. That parity between our dollar and with the United States dollar is an important parity for us today. We have kept in a place for a very long time, but we have had liberalizations on exchange control over the years.”

Mr. Laing added that the reason the government has been taking steps to liberalize exchange controls is because it believed relaxing them would have beneficial effects on the economy.

He added that the question now is how much further can the government go in protecting and preserving the value of Bahamian currency, and allowing Bahamians to have opportunity to take advantage of those opportunities for returns on international economic investments that exist outside the Bahamas.

“It’s a balancing act along those lines, but it’s not one that we haven’t broached before,” Mr. Laing said.

“Certainly we haven’t gone to the extent of elimination, but we will continue to review the circumstances to see the extent to which further relaxation and perhaps one day eventual elimination can take place.”

Source: Bahama Journal