NASSAU, Bahamas, CMC – The Central Bank of The Bahamas says the restrictions placed on foreign exchange outflows at the onset of the economic crisis caused by the COVID-19 pandemic will end this week.
In a statement, it said that as of July 1 it will revert to a maximum of US$5 million on both net long and short exposures, ending the long Bahamian dollar (B$) open position limit on foreign exchange transactions, which was implemented in April 2020.
It said that the limit for other transactions at Tier 1 Capital commercial banks would be fixed at five per cent.
“Inflows from tourism are projected to strengthen over the remainder of 2021 and during 2022. The central bank also announces that as of July 1, 2021, the minimum B$ open position limit, which would apply to commercial banks with branch operation structures inside The Bahamas or with Tier 1 Capital of less than US$20 million, has been increased to US$1 million,” the central bank said.
It said this will afford such entities some increased flexibility in their foreign exchange trading activities.
“The B$ open position limit regulates commercial banks’ purchases and sales of foreign currency from the public. Transactions [sales to the public], which increase the net of B$ assets minus B$ liabilities by more than the open limit must be corrected by corresponding purchases of foreign exchange, either in the interbank market or from the Central Bank.
“Conversely, transactions [purchases from the public], which reduce the net of B$ assets minus B$ liabilities by more than the open limit must be corrected by corresponding sales of foreign exchange, either in the interbank market or to the central bank.”
The bank had taken the decision to suspend the US$5 million ceiling on long exposures last year in response to reduced foreign currency inflows as a result of the tourism industry shutdown.
It required banks to supply larger quantities of foreign exchange from their internal resources before replenishing supplies through the central bank.
The restrictions resulted in an estimated US$400 million in claims on the reserves, Central Bank Governor John Rolle revealed earlier this year.
“The collective measures in our estimation would have provided a cushion in the reserves of between US$350 million to US$500 million depending on how you estimate it. So the impact was real in terms of providing a cushion,” Rolle said last month.
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