Foreign exchange controls

For more information on exchange control, visit Britannica.com.

Types of controls that governments put in place to ban or restrict the amount of foreign currency or local currency that is allowed to be traded or purchased. Common exchange controls include banning the use of foreign currency and restricting the amount of domestic currency that can be exchanged within the country.

Investopedia Says:
Typically, countries that employ exchange controls are those with weaker economies. These controls allow countries a greater degree of economic stability by limiting the amount of exchange rate volatility due to currency inflows/outflows.

The International Monetary Fund has a provision called article 14, which only allows countries with transitional economies to employ foreign exchange controls.

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Government policy limiting the ability of its citizens and/or foreigners to exchange the country's currency for that of other countries and vice versa.

Restrictions on currency flows between countries, imposed by central banks or monetary authorities. A country may: (1) prohibit residents from owning a bank account denominated in another currency or an account in a foreign bank; (2) prohibit exporters from drawing against a bank account except for internal transfers; and (3) limit bank trading in a domestic currency to discourage currency speculation. Exchange controls are common in some European countries and in most developing countries; a bank account in one of these currencies is known as a Blocked Account. These currencies frequently are overvalued in relation to unimpeded currencies, and may not be Convertible easily into other currencies or a monetary standard, such as gold. See also Dirty Float; Restricted Market.

Foreign exchange
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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.

Current countries with foreign exchange controls

(list very incomplete)

• Argentina
• Bahamas [1]
• Barbados
• Brazil [2]
• China
• Cuba
• Egypt
• Fiji
• India
• Sri Lanka
• Libya
• Malaysia
• Mauritius

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.

• Morocco
• Myanmar
• Namibia
• Nigeria
• North Korea
• Pakistan [3]
• Papua New Guinea
• Seychelles
• South Africa [4]
• Tunisia
• Venezuela
• Zimbabwe

See also

• Sterling Area

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