Foreign Exchange Delays with Banks

The blogmaster received a report that some banks in Barbados have forced customers to submit requests for international wire transfers online and as a consequence Barbados importers are being frustrated by delays in processing. The reason for the delays is that in the case of one bank the blogmaster was able to confirm processing of the wire transfers is being done in Trinidad.

The question being asked is whether the transfers are being delayed because of an unavailability of foreign exchange by local banks or a case of the processing office in Trinidad playing ‘god’ or simply inefficient.

The developing situation comes at a time when the IMF has advised government to remove the 2% foreign exchange fee former minister of finance implemented to defend dangerously low foreign exchange reserves in 2017. The fee obviously will impact the high cost of living because Barbados is a net importer. As a first step the government should add key items to an import list that should not attract the 2% fee. The Mottley government boast of high level of international reserves which is mainly a result of borrowing.

IF there is a low level of foreign exchange held by local banks it means the Central Bank of Barbados as is the customer will sell to the banks to satisfy consumer demand? It would allay fears if those responsible address the situation.

Today’s Nation’s story:


IMF: Drop 2% fee 

by SHAWN CUMBERBATCHshawncumberbatch@nationnews.com

THE INTERNATIONAL MONETARY FUND’s (IMF) staff wants Government to phase out the two per cent fee Barbadians have been paying for foreign currency transactions since 2017.

Then Minister of Finance Christopher Sinckler introduced the measure in his last Budget more than four years ago as the country’s international reserves plummeted below the accepted benchmark of 12 weeks of import cover.

It was intended to reduce the demand for foreign exchange and allow the foreign reserves to stabilise. With the reserves at $440 million (five to six weeks of import cover) when the Mia Amor Mottley administration was elected in May 2018, the measure was maintained and remains in place.

With Barbados’ reserves reaching $2.86 billion (42 weeks of import cover) at the end of the September, the IMF’s Barbados mission thinks Government should consider “gradually phasing” out the capitalflow measure “as the pandemic dissipates, and reserves build up”.

This was outlined in the IMF’s latest staff report recently submitted to its executive board as it approved the sixth review of Barbados’ IMF programme and the annual Article IV consultation. The assessment was that Barbados’ authorities “will consider removing the foreign exchange fee as the pandemic dissipates”.

Phased out

“The two per cent fee introduced in 2017 remains in place. This was assessed by the IMF as a capital flow measure and should be phased out as reserves build up,” said the Barbados team led by Dr Bert van Selm.

“However, the authorities plan to maintain the fee until alternative revenue sources, including through an economic and revenue recovery, can compensate for the potential losses from its discontinuation. Staff stressed that foreign exchange fees should not substitute for fiscal and other macroeconomic policies to improve fiscal position.”

In the Central Bank’s review ofBarbados’ economic performance between January and September, it reported that non-tax revenue, including the foreign exchange fee, was $64.1 million between April 1 and September 30, the first half of Government’s financial year. This was an increase over the $47.4 million earned in the same period last year.

Governor Cleviston Haynes said: “With the increase in foreign exchange transactions, revenue collected via the foreign exchange fee accounted for almost half of the enhanced uptake from non-tax revenues which expanded by $17

million.”

Reserves boosted

Barbados’ foreign reserves were boosted by $249 million in loans from multilateral lending agencies, “and an injection of $261.6 million from the IMF via its allocation of [Special Drawing Rights] to members boosted reserves over the nine-month period”.

Haynes added that “despite these inflows, the reserve increase for the nine-month period was only $204 million, a result of the steepreduction in travel credits during the first quarter, and the pick-up in import demand over the last six months that led banks to purchase foreign exchange from the Central Bank to meet customer needs”.

Additional external payments were related to debt service and other expenses on behalf of the Government, he reported.

The two per cent foreign exchange fee is charged on purchases of foreign currency and payments related to foreign currency transactions. It is applied to purchases and payments made at commercial banks and other authorised foreign exchange dealers, credit card providers and money service providers that handle outbound foreign currency transactions or loans.

This means that consumers who buy foreign cash, pay for a wire transfer or bank draft, or use their credit, debit or travel card to pay for a foreign transaction, have to pay the fee.

133 comments

  • @Artax

    For sure she has been the blue eyed girl so to speak. She an her husband were too agents at CLICO as well.

    Like

  • Banks tend to bulk up and net FX trades by currency pairs
    so if someone is buying USD and someone is selling USD
    then one deal is made for the net total
    this will be applied to 100s and 1000s of trades for a day

    Like

  • A huge chunk of Barbados economy is owned by Triinis .They themselves have been experiencing currency shortage for six years in a row, The fee should stay in place as a means of capital control. Iceland had capital controls for ten years after the collapse of their banking sector in 2008.

    Liked by 1 person

  • fortyacresandamule

    Jamaica is the only caricom country and one of the few small states globally to run a market-based foreign exchange regime. There are no restrictions concerning foreign currency trade. However, it comes at a steep price with frequent exchange rate volatility, mostly moving in one direction of depreciation,

    Liked by 1 person

  • As a country we don’t earn enough forex to fully liberalize the market.

    Like

  • fortyacresandamule

    @David. Correct, but yet we want to live the same life style as if we are earning surplus foreign currency.. The fact of the matter is that most people rarely think about the reserve and the consequences of their consumption behaviour. Our mindset and access to foreign currency is seen more as a right and entitlement.rather than a precious resource.

    Like

  • @ fortyacresandamule December 25, 2021 4:14 AM

    We could save 50 per cent on foreign currency if our population were not so incredibly fat and gluttonous.

    Merry Christmas anyway!
    I’m already looking forward to high inflation in the coming years. That will help us enormously with debt relief.

    Liked by 1 person

  • Vincent Codrington

    @ David Bu

    We seem to be managing our foreign reserves position regardless of whether we understand it or not. Our Economy is so structured that the relatively free market system is managing our supply and demand for foreign currency.There is no need to envy Jamaica or any other country their methods. We do what works for us.

    Like

  • fortyacresandamule

    @Tron. You are hilarious indeed. Anyway, happy holidays to you and your family.

    Like

  • This makes you wonder why Barbados governments terrorize the Rasta Community over marijuana and refuse to do right by the group who have indigenous rights….wuh look with all the barriers they put in place, they won’t even be able to get the finished product or the raw material into Canada to generate foreign exchange for the foreseeable future…..wonder if they are understanding these ramifications…..won’t hold my breath, most people have already moved on..

    and some countries on the continent are streaming full speed ahead…

    cannot help those who do not want to help themselves with a second economy within the Afrikan family.

    “disparate group of countries, businesses and organizations is calling on the Canadian government to remove nontariff barriers effectively blocking commercial imports of unapproved medical cannabis, even as some local players say the ban is needed to protect squeezed domestic cultivators.

    Businesses – some with their headquarters in Canada but production overseas – have joined countries such as Colombia and Jamaica in calling out Canada for prohibiting foreign competition within its medical marijuana industry, which largely remains closed to foreign exporters.”

    Like

  • wuhloss, ah even forgot, they already got their marijuana slave plantations set up, complete with wannabe slave masters, some from Canada too, security and guard dogs…..

    Karma will always get ya, retribution will always SEAL THE DEAL.

    Like

  • WURA-War-on-UDecember 25, 2021 7:05 PM wuhloss, ah even forgot, they already got their marijuana slave plantations set up, complete with wannabe slave masters, some from Canada too, security and guard dogs…..

    This is disgraceful. Local small operators still not allowed to grow the crop, but certain people can walk in and set up large operations.

    What SHOULD have been done, is that venture companies set up on the local (admittedly non existent, but this is exactly why) stock exchange, with locals allowed to invest. This money then used to set up R&D, (grow) manufacturing capacity, branding, sale and export.

    THAT is how local business is grown. Albeit, in the wrong country, the above venture money would disappear to corruption.

    Have you noticed that all of the bigshots that come in from some places end up being characters of interest..a couple even ended up up being charged by North American authorities, such as the cricket man.

    People loves to big up these folks….but then things blow.

    But that is plantation life.

    Like

  • WARU disparate group of countries, businesses and organizations is calling on the Canadian government to remove nontariff barriers effectively blocking commercial imports of unapproved medical cannabis, even as some local players say the ban is needed to protect squeezed domestic cultivators.

    This is why I laugh when people say that Barbados cannot do this or that, referring to WTC rules. The Canadian economy, including banking sector, is highly protected by legislation, go check it. And here in this matter that you mention, protective, anti competitive measures.

    WTC rules WHAT?

    Like

  • @Crusoe

    Is it true businesses in Canada involved in cannabis trade have serious issues accessing banking services? Please paint the full story of the issue.

    Like

  • Court decision key victory for Barbados

    By Ezra Alleyne

    As the country struggles to overcome COVID-19, a singular piece of good luck arrived early in the island’s Christmas gift stocking.
    A very important decision delivered by the Canadian Supreme Court on December 3, was the container in which the island’s Christmas gift was wrapped.
    The Canadian Supreme Court held that the Canadian parent company of a Barbados registered offshore bank, operating in Barbados, could not be taxed in Canada on the income of the offshore bank which was its subsidiary (that is to say that the bank was owned by the parent).
    As Barbados gets the lion’s share of its offshore business from Canada, those of us who understand “international tax law” and who have Barbados’ interest at heart were ecstatic with this result.
    The decision matters greatly to us. Just think of it: the only sector that increased its share of national revenue to the economy – and in foreign currency to boot – during the pandemic was the offshore sector.
    The sector has taken a battering from the OECD and the EU in recent times, and this decision, which gives our international sector a further stamp of approval, is the result of far-sighted political decisions taken decades ago.
    Politicians of all stripes get lashes, many times undeserved, when they try to carry their countries in new directions. Moving Barbados in this direction was greeted with howls of disbelief in important quarters.
    It was said that the mafia and other unsavoury elements would overrun the country. Dr Richie Haynes’ speech in Parliament was an acerbic and scorching cautionary contribution.
    Nevertheless, the Tom Adams-led “Great Combination Parliament” of 1976 – 1981 took the sector by the scruff of its neck and rescued the International Business Companies Act from its deathbed.
    First of all, a small tax was charged on international business companies, and we also legislated, for substance rather than mere post box operations was mandated. The third fix was pushing our treaty network.
    While these may seem technical matters, and they are, the political will to get it done deserves kudos. These very specific factors played a vital part in this most recent decision. Modesty prevents me from detailing my role in pushing the Barbados Labour Party’s offshore policy and getting it in the 1976 manifesto.
    I can, however, pay tribute to people like Sir Trevor Carmichael and to Lynette Eastmond, and to the late David King, as legal advisor to the Central Bank, in working to see the sector established firmly in the economy. Central Bank Governor Dr Courtney Blackman ensured the sector got the institutional backing of the Central Bank in its early days.
    As special advisor to the Prime Minister at the OECD meeting at Sherbourne, I can speak directly of the powerful fight put up by the late Owen Arthur in 2001 supported by high-quality legal advice of Sir David Simmons as Attorney General and Lynette Eastmond’s specific international tax law expertise.
    Key part of matrix
    Tom Adams was in 1975-1976 agitating himself with getting a foreign exchange-earning successor to sugar, which was dying a natural death. He was also keen to build out tourism, especially to St Peter. The offshore sector was a key part of that matrix. Hence Highway 2A and the flurry of other legislation in his nine years as Prime Minister. Political will does matter.
    As it did with the credit union movement, the Barbados Labour Party similarly inserted the appropriate fiscal policy to induce the success of the offshore sector.
    This country’s local authorities now need to ensure that more seed work is done to secure the future of this important sector. The study of international tax law is now an imperative. National development scholarships should be considered.
    In early 1976, I volunteered to enter Cave Hill as a full-time law lecturer to pioneer the teaching of tax law and company law – a deliberate decision.
    I thought we had to constantly produce our home-grown experts in these areas. As a law tutor I have pointed the footsteps of many young lawyers in that direction. Antiquated institutional rules cut short that tenure once I became elected, but we are fortunate as a country to have had key personnel in decision-making places at critical times.
    A moment’s reflection is required on this latest case. The parent company of the offshore bank was the largest supermarket chain in Canada. The accumulated gross income of the bank in the seven years of its operations amounted to $415 million. We may ponder on the ripple effect had the case gone the other way.

    Ezra Alleyne is an attorney and former Deputy Speaker of the House of Assembly.

    Source: Nation

    Like

  • NEW FISCAL PATH
    Rules to be in place by April 1 for tighter financial management
    By Shawn Cumberbatch shawncumberbatch@nationnews.com
    Parliament and the Auditor General will have more oversight of Government’s financial management, including debt and spending, under new fiscal rules scheduled to be in place from April 1.
    Government is also considering allowing an independent body to assess the economic projections it uses to prepare budgets and overall fiscal policy.
    As permitted under the Public Finance Management Act, which was enacted in 2019, the Public Finance Management (Procedural Fiscal) Rules, 2021, were made by Cabinet on December 17.
    The new rules, which the International Monetary Fund (IMF) says are “in line” with technical assistance recommendations from its Fiscal Affairs Department, commit the Mia Amor Mottley administration to “a debt anchor which would require Government debt to decline to a numerical level by a date to be specified in the Fiscal Framework; and a primary balance path consistent with the debt anchor”.
    The primary balance is “the overall budget balance of revenue and grants received, less expenditure but does not include interest due and payable”, while the primary balance path means future annual primary balances.
    “The primary balance of the procedural fiscal rule . . . shall be expressed as a percentage of the gross domestic product,” the rules outlined.
    “Where there is a conflict between the debt anchor and the primary balance of the procedural fiscal
    rule . . . , the debt anchor shall take precedence over the primary balance.”
    Under the new provisions, Parliament and the Auditor General are to ensure Government follows the fiscal rules.
    “The Ministry responsible for Finance shall invite the Parliamentary Standing Committee on Finance to comment on Government’s compliance with its fiscal targets,” the Government document said.
    “The Auditor General shall review the calculations of debt and the primary balance to ensure that they were performed correctly and in compliance with these rules. The comments of the Auditor General pursuant to his review . . . shall be included in the report of his annual audit of the Government’s financial statements,” it added.
    From April 1, the start of Government’s 2022/2023 financial year, the Ministry of Finance, in measuring Government’s debt and the primary balance, will have to include all Central Government ministries and departments.
    “The Ministry responsible for Finance, in measuring the primary balance, shall use cash accounting.
    “The Ministry responsible for Finance, in measuring the Government debt, shall use modified accrual accounting, that is to say, by adding the expenditure arrears to the cash estimates,” the rules stated.
    “In assessing the fiscal risks of the Government, the Fiscal Framework shall include fiscal risks associated with . . . stateowned enterprises [SOEs] and commercial state-owned enterprises; and any public-private partnership contracts.”
    Cabinet has determined that this assessment “shall take into account the performance of the entities referred to . . . for a period of at least five years”.
    The Ministry of Finance will be responsible for monitoring the daily execution of the measurable fiscal objectives “and shall, in the annual Fiscal Framework and the Mid-Year Review Report, document clearly, compliance with those objectives”.
    If in any year Government deviates from its fiscal objectives, the fiscal rules will compel it to “in the next Fiscal Framework set out in detail the measures it will implement to address the deviation and the expected time to achieve it; or the reasons why it will not implement measures to address the deviation”.
    The IMF said in its new Barbados country report that the procedural fiscal rules “will enhance transparency and accountability in fiscal policy-making while maintaining sufficient flexibility to respond to the pandemic”.
    “Deliberations over a numerical fiscal rule are expected to resume once uncertainties surrounding the pandemic have resolved
    and supporting public financial management systems have been sufficiently strengthened,” it added.
    Government has told the IMF that it will adopt the numerical fiscal rule “once the pandemic uncertainty has passed and requisite support frameworks are established”.
    Key elements of this would include “a framework to limit the annual budgeted overall fiscal deficits of the public sector (covering all fiscal activities), to achieve a reduction in public debt to no more than 60 per cent of GDP by fiscal year 2035/2036”.
    It would also “take into account all fiscal activities associated with the public sector, including SOEs, as well the fiscal implications of public-private partnerships, capturing all associated actual or contingent fiscal liabilities and risks”.
    Government said it would also consider “requiring an independent body to independently assess macroeconomic projections used in budget preparation and overall fiscal policy, disclose budget execution with respect to the fiscal rule, and support transparency and accountability through Parliamentary hearings by officials”.


    Source: Nation

    Like

  • “The Canadian economy, including banking sector, is highly protected by legislation, go check it. And here in this matter that you mention, protective, anti competitive measures.”

    but do you blame them…Canada MUST protect itself, must protect it’s cultivators and processors, and to take the thought even further, especially since so many unscrupulous leaders are DETERMINED to use ENSLAVEMENT and marijuan slave plantations to achieve exportation of product and foreign exchange income..

    yes, Canada has a well hidden HISTORY of slavery, but they worked hard to rise above that with the Harriet Tubman underground network…imagine the banks having to explain that importation and outflow is DERIVED from ENSLAVEMENT PRACTICES in Barbados or Jamaica or any of the other islands…..imagine the WORLD WIDE BLACK EYE the government will get if they enable and collude in such retrograde criminal practices…

    none of this can be allowed just for the sake of FOREIGN EXCHANGE…when lazy governments REFUSE TO USE THEIR BRAINS to UPLIFT Afrikan populations, but willing to revert to what comes easily to their CRIMINAL MINDS…so they can prance around the world stage telling even more lies and being even more decetful…

    don’t think Canadians are THAT DAFT..

    Like

  • “This is disgraceful. Local small operators still not allowed to grow the crop, but certain people can walk in and set up large operations.”

    Again….Mia was WARNED about this….now that too has BLOWN UP ON HER…

    “Have you noticed that all of the bigshots that come in from some places end up being characters of interest..a couple even ended up up being charged by North American authorities, such as the cricket man.”

    People loves to big up these folks….but then things blow.”

    they ALWAY look FOR THE WORST TYPES OF CRIMINALS as long as they are not of Afrikan persuasion, remember Big Mike and his private jet, gushing all over Herbert’s plantation about how big his marijuana farm was going to be, how he was going to put the locals to work….idiot did not even have experience in any of that, just a mere soil technician, and allegedly a well known CON MAN….but the right color persuasion FOR THE NATURALLY CORRUPT…

    fasten ya seatbelt more to come..

    Like

  • must protect its cultivators and processors,

    Like

  • Crusoe…even worse…these governments LURED the Canadian and other investors, some of whom PUT MILLIIONS OUT THERE in investment…one guy said he put out 10 MILLION DOLLARES…

    who will reimburse these people, surely not Barbados’ taxpayers….but someone is LIABLE…hope it turns into PERSONAL LIABILITY/TORT against individual government ministers for their recklessness…,..since the people had nothing to do with it and those like myself were SHOUTING OUT against it from DAY 1 and got cussed soundly in BU for it……when word reached us that some of them sent their family members abroad to lure these white investors very early in the game…they certainly can’t pick up IMF loan money to settle any claims made against them…

    ..can’t make none of this shit up that’s playing out in real time…🤣🤣🤣🤣🤣..

    Like

  • African+Online+Publishing+Copyright+ⓒ+2021.+All+Rights+Reserved

    These writings ARE NO JOKE, this writer saw all of this playing out……ask anyone who has read them.

    BOOKS

    Like

  • “Modesty prevents me from detailing my role in pushing the Barbados Labour Party’s offshore policy and getting it in the 1976 manifesto.”

    “As special advisor to the Prime Minister at the OECD meeting at Sherbourne, I can speak directly of the powerful fight put up by the late Owen Arthur in 2001…”

    “In early 1976, I volunteered to enter Cave Hill as a full-time law lecturer to pioneer the teaching of tax law and company law – a deliberate decision.
    I thought we had to constantly produce our home-grown experts in these areas. As a law tutor I have pointed the footsteps of many young lawyers in that direction.”

    “Antiquated institutional rules cut short that tenure once I became elected,…” I think that means he got ‘fired’.

    Surprise this guy finds time to write.. so busy loving the guy the mirror and trying to screw himself.

    😀Looks as if Theo had a bad Xmas😀

    Like

  • Thought he was a constitutional law expert. Would love to see him comment on the Garth Patterson article.

    They tell you how great they were in the past ..

    Like

  • “Surprise this guy finds time to write.. so busy loving the guy the mirror and trying to screw himself.”

    sorry Theo..but that is all ya are going to get, even about the retroactive SLAVE CONSTITUTION brought back to life……even about the marijuana SLAVE PLANTATION COCKUP..

    Like

  • Notice that they would prefer to IMPLODE rather than admit that what they are doing to the people is FUNDAMENTALLY WRONG AND CRIMINAL…they have convinced themselves that being part of the diplomatic community temporarily makes them invincible and untouchable, while totally not knowing or CARING that RA IS IN CONTROL…and we ARE THE DESCENDANTS…

    Like

  • @Vincent

    What do you mean by ‘managing our reserves’. How much of it is derived from borrowing versus earned?

    Like

  • Dec 26 4.44am
    I have read this article 10 times in the last 2hrs and remain confused. The holiday rums? Hoping the head might clear by tomorrow 😃

    Like

  • David 4.29
    The answer is yes. The reason is Mary Jane while federally legal in Canada is not so in the USA. The Cdn banks have an increasing footprint in the US (just before Xmas BoMontreal announced the 16B buyout of Paribas in US) and get blowback from the US authorities. This is typical big country politics as they try to enforce their laws on the rest of the world. Exactly how banking dodged more stringent oversight in the NAFTA negotiations remains a mystery.

    Like

  • @NO

    Thanks. Will be interesting to observe how Barbados government negotiated the hurdle.

    Like

  • I was amused.
    I recall in the blogmaster’s occasional exchanges on social media with Dr.Robinson, then Chair of the NIS, he noted one of the challenges in producing financial statements resulted from the change from cash to accrual accounting.
    Now we have the MoF using one method, cash for the primary balance, but accrual for debt. And the ijit IMF speaks to improving transparency and accountability. I observe this as perpetual obfuscation. We already know why there will be issues in reconciling numbers…lol.

    Like

  • Someone must be on the run, but the world has shrunk significantly…

    Like

  • @John A

    You saw this news item?

    Like

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