Foreign currency flow restrictions could have saved $500 million

Foreign currency flow restrictions could have saved $500 million

Bahamas: The Central Bank’s governor- John A Rolle on 4 May,2021 disclosed that restrictions on the foreign currency flows imposed at COVID-19 pandemic peak could have saved up to $500m in external reserves.

Governor – John Rolle, stated, “Speaking as the Central Bank revealed its 2021 first quarter economic assessment, the measures introduced exactly one year ago to support The Bahamas’ vital one US dollar exchange rate peg had served to keep the nation’s foreign currency reserves above the $2bn mark.”

He added, “The collective actions, in our estimation, would have provided a buffer in the reserves between $350m to $500m depending on how you estimate it. The impact was real in terms of providing the cushion.”

“Then you had the government with its financing activities [foreign currency borrowing] occasionally providing replenishment in the reserves level. Without this money the reserves would be – few hundred million dollars below the $2bn mark at this point.”

Following the statement he cited, “To preserve The Bahama’s foreign currency reserves, and sustain its ability to import reserves at the COVID pandemic’s height, the Central Bank suspended the Investment Currency Market (ICM) that allowed locals and residents to invest in the international securities and real estate.”

Mr Rolle previously pledged that it would be reviewed by the 2021 third quarter, halting between $50m to $100m in annual foreign currency outflows.

He concluded, “The other measures imposed by the Central Bank included a bar on dividend repatriations by the Canadian owned commercial banks and a relaxation on bank foreign exchange sales to the public and the National Insurance Board- (NIB) converting its overseas investment holdings. The dividend restriction has since been relaxed.”

On asking that whether The Bahamas could reach a tipping point in its foreign exchange reserves holdings, Mr Rolle further acknowledged “It is Right to be concerned about tourism and the reserves” but he further added “We don’t see ourselves in that neighbourhood right now.”