Foreign exchange controls
Foreign exchange controls are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents.
Common foreign exchange controls include:
- Banning the use of foreign currency within the country
- Banning locals from possessing foreign currency
- Restricting currency exchange to government-approved exchangers
- Fixed exchange rates
- Restrictions on the amount of currency that may be imported or exported
Countries with foreign exchange controls are also known as "Article 14 countries," after the provision in the International Monetary Fund agreement allowing exchange controls for transitional economies. Such controls used to be common in most countries, particularly poorer ones, until the 1990s when free trade and globalization started a trend towards economic liberalization. Today, countries which still impose exchange controls are the exception rather than the rule.
Often, foreign exchange controls can result in the creation of black markets to exchange the weaker currency for stronger currencies. This leads to a situation where the exchange rate for the foreign currency is much higher than the rate set by the government, and therefore creates a shadow currency exchange market. As such, it is unclear whether governments have the ability to enact effective exchange controls.
Current countries with foreign exchange controls
(list very incomplete)
- Sri Lanka
- Theoretically speaking, exchange controls were abolished in 1994, but the rules still state that repatriation of foreign investment and the profits from it is subject to proof of the origin of the money, and subject to payment of any outstanding Mauritian taxes.
- North Korea
- Papua New Guinea
- South Africa
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- "The Central Bank of The Bahamas". Centralbankbahamas.com. Retrieved 2013-06-14.
- Nélio Weiss and Philippe Jeffrey (April, 2005). "Brazil: Brazil simplifies foreign exchange controls". International Tax Review PricewaterhouseCoopers. Retrieved 2009-12-29.
- "Foreign Investment Laws and Regulations in Nepal". Foreign Investment in Nepal. Retrieved 13 Aug 2012.
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- "Chapter 6 Foreign Exchange Controls". Taseer Hadi Khalid & Co, the Pakistan member firm of KPMG International, a Swiss cooperative. 2004. Retrieved 2009-12-29.[dead link]
- Annual Report on Exchange Arrangements and Exchange Restrictions 1979 - International Monetary Fund - Google Books. Books.google.com. 2000-02-29. Retrieved 2013-06-14.
- ExchangeControl.net - Features “basic data relating to the world’s Exchange Arrangements and Controls”
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