8|Page  The question will still come up as to how far The Bahamas should go with liberalisation, both for direct investments and portfolio transactions.
The extensive work that the IMF has done has been to advise that countries should sequence liberalisation at least one step after the upgrade to institutional and policy arrangements has been made, which allow the country to optimally manage the transformed environment.9 At the extreme, the IMF’s view is that a flexible exchange rate would be ideal to allow a country to absorb the effects of large movements in short-term capital.