Central Bank Governor John Rolle said the investment currency market for Bahamians has shown considerable strength, as a rebound continues in the second half of the year.
The Central Bank reported in its most recent economic forecast last week that during the first half of the year, commercial banks reported a 50 percent rise in total purchases of foreign exchange from the private sector. There was also a 33 percent increase in local demand for foreign exchange, albeit mostly to pay for imported goods and services.
“We are on trend to see use in that market exceed any of the previous years, so we are not very far off from reaching new heights in terms of the investment currency market. And that reflects largely the kinds of investments Bahamians are making in the foreign stock markets and also some interest, not dominant, that parts of the market have in cryptocurrencies and other types of investments,” Rolle said last week.
When we look at what’s going on, insofar as exchange control is concerned, the first focus that we have at the Central Bank is improving and continuing to improve the administrative processes so that citizens can in the ordinary course of doing transactions abroad have less of a need to interact with the Central Bank for approval. That reflects the way that we relax in some cases the limits within which some persons can transact when they go to the commercial banks to purchase foreign exchange.”
Rolle said additionally the Central Bank is focused on how it can best increase the access Bahamians have to make direct investments abroad and how to facilitate a non- Bahamian dollar marketplace to raise money to fund their businesses.
“So, those are areas where the impact is more on the longer term aspects of investments. That is an area where we can continue to make progress at a faster rate insofar as the exchange control regime is concerned. Where we have to always be very measured and careful is how liberalization impacts the very liquid financial flows that happen within our financial services sector, particularly those that are targeting the capital markets,” he said.
“In that area the Central Bank is going to continue to be very measured and considered because that is the area where you are likely to see the use of your foreign exchange being more sensitive to sentiments around what’s happening on a very short-term basis within your economy, within public finances and things start to look very speculative in terms of how people might be reacting.”
The bank said the private sector contributed to more than half of the net foreign exchange that was consequently retained by the Central Bank over the first six months of 2022. That helped to provide the strong increase in external reserves which were estimated at $3.2 billion at the beginning of August, which was also supported by the proceeds of government borrowing.