NASSAU, BAHAMAS — The Central Bank’s recent exchange control liberalization measures, slated for implementation in June, will allow individual investors to invest up to $100,000 annually without prior approval, potentially driving activity to the tune of $200 to $300 million, according to Governor John Rolle.
The Central Bank announced back in March that reforms to the ICM would allow individual investors to operate more freely within annual limits, with the framework maintaining the five percent premium on foreign currency purchases, a key determinant of usage. It noted at the time that overall, the 2024 measures are anticipated to improve efficiencies for both residents and temporary residents (work permit holders).
Governor Rolle further explained on Monday: “What will be happening as of June is individuals who would want to get foreign currency to invest abroad can go directly to the commercial banks and provide evidence that they have investment account facilities whether with one of the local financial institutions or a foreign financial institution and on that basis they would be able to walk through the process with their bank to obtain funding to those accounts or funding to add to accounts.”
He added: “It means once Bahamians have established investment accounts abroad with either local or international financial institutions, they will be able to fund the accounts up to $100,000 annually without having to obtain direct approval from the Central Bank.”
Governor Rolle expressed confidence in the commercial banking sector’s ability to conduct due diligence around such transactions.
“We think the banks are capable of conducting the due diligence around these transactions and therefore it allows the public to experience a more expedited process to gain access to these transactions. It is to promote more efficiency recognizing that we are able to see overall what’s happening and to be assured that there isn’t any unwelcome effect on the foreign reserves reserves.”
He noted that the country’s robust foreign exchange market sees at least $8 billion in inflows and roughly the same in outflows. “
“We saw some of the responses to the changes in the investment currency market after the first important liberalization which was pre-2019 when the investment currency premium was reduced from 12.5 percent to 5 percent. We did see a huge uplift in demand and saw that carry into 2023. The expectation is that in the medium term if Bahamians are investing abroad we shouldn’t be surprised if it’s in the $200 to $300 million range annually and that wouldn’t be a figure that would be unmanageable for us,” said Governor Rolle.
Regarding the country’s external reserves, the regulator’s report noted that during March, external reserves increased by $58.7 million to $2,898.2 million, a reversal from a $2.6 million decline a year earlier.
“Underpinning this development, the Central Bank’s net purchases from commercial banks extended to $127.9 million, from $95.3 million in the previous year. In addition, the Central Bank’s net sales to the public sector moderated to $75.3 million from $93.2 million in the preceding year. Meanwhile, commercial banks net purchases from their customers were also expanded to $124 million from $93 million. On a year-to-date basis, external reserves expanded by $547.0 million, surpassing the $98.2 million growth in 2023.
Governor Rolle noted: “In terms of the external reserves, I would say that we would expect more than the half-a-billion drawdown we have seen this year, but I wouldn’t be too precise in terms of where I think they finally settle other than to say I think they would be moderately below where we began this year.”
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