FURTHER LIBERALISATION OF EXCHANGE CONTROL TO FACILITATE CSME AND OTHER TRANSACTIONS

FURTHER LIBERALISATION OF EXCHANGE CONTROL TO FACILITATE CSME AND OTHER TRANSACTIONS

The Central Bank of Barbados hereby announces the further liberalisation of exchange controls to facilitate CARICOM Single Market and Economy (CSME) transactions in fulfilment of stated commitments by Barbados.

Borrowing and Lending

Authorised Dealers are now permitted, without reference to the Central Bank of Barbados, and subject to certain conditions, to grant an advance (by way of loan, overdraft, indemnity or guarantee) for use in Barbados as follows:

i. to a CSME resident individual to facilitate reasonable settling-in expenses, including furniture, equipment, household appliances and motor vehicles, without limit, except for acquisition of real estate

ii. to a company operating in Barbados controlled by CSME residents up to a maximum limit of $1.0 million per year, except for acquisition of real estate.

Foreign Currency Accounts of Residents

It is anticipated that in a fully liberalised CSME environment, CSME residents will have the same facilities available to them as Barbadian residents.  In an attempt to start levelling the playing field for Barbadian residents earning foreign exchange relative to CSME residents in similar situations who are presently able to retain their earnings in foreign currency, it was decided to allow Barbadians who earn foreign exchange to retain some proportion in foreign currency.  While this does not exactly level the playing field, it is the first manageable step in that direction.  It is also hoped that this will encourage Barbadians holding foreign currency abroad (which is earning very little in the context of the current very low international interest rate regime) to repatriate funds to Barbados.

Accordingly, Authorised Dealers are now permitted:-

i. to open and maintain foreign currency accounts in the names of residents of Barbados (individuals and companies) up to 30% of foreign currency earned and surrendered, in the same currency in which it is surrendered, without limit.  The minimum amount to which the 30% may apply is the equivalent of BDS$3,000.00 (This means that an individual or company surrendering the equivalent of BDS$3,000.00 in foreign currency may credit the foreign currency equivalent of BDS$900.00 to a foreign currency account and may credit the remainder to an account denominated in Barbados dollars).

ii. to continue to credit the full amount surrendered to those foreign currency accounts for which permissions were previously obtained by companies until June 30, 2009, without applying the surrender requirement.  Permission will be required to vary from this arrangement after June 30, 2009.

Foreign Currency Accounts of Non-Residents

Authorised Dealers may continue to open foreign currency accounts funded in the names of non-residents, including Barbadians and CSME nationals permanently residing outside Barbados, (or living in Barbados for less than three years), without limit on these accounts. Non-residents may continue to place the full amount of funds brought into Barbados on their foreign currency accounts.  However, since CSME residents living in Barbados for three (3) years are treated as residents for exchange control purposes, they will be subject to the surrender requirement applicable to residents.

Increased Speed and Efficiency

Speed and efficiency in handling applications have been enhanced through higher limits of delegated authority from the Minister to the Central Bank and from the Central Bank to Authorised Dealers and Authorised Depositaries. The Bank is also strengthening its off-site surveillance of foreign exchange transactions through development of an electronic data interface with commercial banks and other Authorised Dealers.  This should facilitate monitoring when further liberalisation takes place.

Likely Impact of the New Measures

These measures represent the continuation of the strategy of gradual and measured economic and financial reform.  The measures are designed to enhance the business climate, improve efficiency and attract foreign investment, within the context of maintenance of the fixed exchange rate. The Central Bank is mindful of the weak international environment and has therefore decided to implement only such measures as might facilitate the private sector, without significant risk of adverse impact on the foreign reserves.

October 20, 2008