The Central Bank and the government recently revealed specifics relating to the relaxation of the controls, including a slashing in half of the 25 percent premium charged on Bahamian investments abroad.
As part of those new measures, foreigners would also find it easier to invest in The Bahamas, and Bahamians relocating abroad would be able to take up to $250,000 annually per family as opposed to $100,000 out of the country with them.
“We’ve estimated that these measures are estimated to have an impact on reserves of between $50 million and $60 million annually,” Central Bank Governor Wendy Craigg said.
“As far as the investment currency market is concerned, we do not think the change in rate will have a major impact on our reserves. Currently, there is a balance of about $2.8 million in that market. That means that investors have invested about $2.8 million overseas.”
The new relaxations will also allow resident investors, including individuals, pension funds and institutions, to invest in any company listed on a recognized stock exchange by way of Bahamian Depository Receipts (BDRs), which allow Bahamians to buy in Bahamian dollars, stocks traded on overseas exchanges.
And Bahamians working at offshore or foreign firms in The Bahamas will now be able to invest up to $25,000 per year as opposed to the old limit of $10,000.
The Central Bank has said that this change will allow Bahamians to take further advantage of opportunities resulting from their employment and to enjoy benefits equivalent to those available to their overseas counterparts.
“As far as the funding of the BDRs, that would have an immediate outflow depending on the usage of that programme of $25 million,” the Central Bank governor said.
“The employee stock options, we don’t expect that to increase beyond an amount in the region of $3 million. Currently, there’s about $2 million to $5 million that goes out annually for that. On the timeshare investments, we know that a lot of Bahamians already have timeshares. We don’t expect the outflow to be more than about $2 million to $3 million.”
Under the new regime, residents may now invest up to $25,000 per family unit once every 10 years in foreign real estate timeshare purchases.
“As far as the emigration is concerned, we’ve placed that in the region for about $3 million annually and for the regional cross border listings, because the limits are identical, we don’t expect that to have any impact on the resources,” Mrs. Craigg said.
Within prescribed limits, equities of Bahamian companies listed on BISX may now be cross-listed on principal CARICOM exchanges and vice versa.
Minister of State for Finance James Smith said the new exchange control regime should encourage more investments. He too is not concerned that the relaxations will strain foreign reserves.
“We spend several hundred million dollars per year on current items – travel, automobiles [etc]. I don’t think you’re going to see a change in overall expenditure of foreign services and goods. It’s just going to be maybe a change in the allocation, some more will go toward capital accumulations as opposed to consumption,” Mr. Smith said.
“By that I mean a Bahamian may decide instead of getting a $60,000 car, he may get a $30,000 car and $30,000 worth of stock in the stock exchange in New York, which means the expenditure or the impact on the reserves is the same-so if that outcome is reasonable in terms of prediction, I think The Bahamas ought to be stronger because it would be using its reserves more wisely, more toward investment than consumption.”
He said the relaxation of controls reflects the growth in the economy over time as opposed to “a big bang”.
“It’s difficult to say what the impact may be over time in quantitative terms, but I think qualitatively it changes, or we hope it would change, the Bahamian outlook in terms of its investment strategies,” Minister Smith said.
He added, “In an increasingly globalised world with integration of markets, there’s a need for The Bahamas to engage the wider community both on the regional and the world level by our entrepreneurs being able to access capital not only from local savings, but foreign savings and also foreign entities can come into The Bahamas in a limited way and also raise capital.
“So, we will be in a position to invest abroad and people abroad will be in a position to invest here and the result of that ought to be a win-win for both economies.”
By: Candia Dames, The Bahama Journal
