Foreign exchange control liberalisation Let me touch on the Bank’s decision to remove the remaining controls on foreign exchange. The first question many may ask is the obvious one: why liberalise the exchange controls? The rationale as I have stated is to allow for a smoother flow of capital into and out of the country.
Under a floating exchange rate regime, exchange controls are not required because the market can adjust itself to meet the supply and demand of foreign currency and the exchange rate acts as an adjustor to adverse impacts from domestic or external shocks. Prior attempts and intentions to liberalise exchange controls did not eventuate.