FROM THE TIME that our Central Bank freed up the use of the credit card, it had a problem with the control of foreign exchange.
There is no control by the banks on the amount of foreign exchange used on a credit card in a year as was the custom when a control occurred when the amount used was stamped in your passport. In many of my articles I would ask about the abuse people made of the credit card and the popularity of online shopping that could exacerbate the pressure on our foreign exchange. Stop using taxation as a means of trying to control how foreign exchange is used and look elsewhere.
Impose a limit on the way in which a bank can approve of the drawing of foreign exchange in order to complete a purchase from abroad. Banks will not like it, as it will limit their profitability as they delight in exchange charges, interest at 28% and commissions on the seductive and modern habit, but a habit that is draining our coffers. Additionally, not only the banks, but also business firms, some of them foreign merchants, have joined on the bandwagon. I had appealed in my articles to rein in this dangerous habit. You can now get a credit card from any food, appliance, clothes or car store to go to San Juan, “full” up your suitcases, come back to Barbados and get US dollars to pay for your splurge. And all the time the foreign exchange (maybe earned and brought in from tourism), pays for it instead of buying equipment for the QEH. Lord “havist”mercy, Lowdown help me!
You have given carte blanche to Sam Couche and the Duppy to not only jook out the eye of Bajans with their prices, but allow them to operate like banks in issuing credit cards and be in competition with a supposedly regulated sector. This increases the ability to lure credulous Bajans into what people say is modernisation. However, not every modernisation is good for a country that is struggling with the use of foreign exchange. Stop using taxation as an excuse. Look elsewhere, the problem is central, and so do something about it.
So while a merchant is complaining recently in the newspapers and his suggestion to his peers to buy in bulk and from the original source, those merchants appealed to should have been more supportive of the constant plaintive cries of the Wild Coot when he tried to object to the way that tax incentives were given to Sandals et al, when he pointed out that the greater influx of tourists “dem” would not bring a greater number of greenbacks to our Treasury. Few people have supported the objections made by the Wild Coot. Now we see that his difference from the opinion of the hierarchy has been justified. More tourists came for the first six months, but not only is there less foreign exchange, but also less tax paid.
Banks may not be complaining about the intrusion on their domain by nonbanks since these nonbanks must have a “backative” for which the banks will impose a charge. In any case the experience of the Wild Coot is that in every downturn banks make a profit. When I say banks, I do not mean the Central Bank. That bank had its own problems. It cannot afford to charge its biggest borrower any substantial fee, as its biggest borrower cannot afford to pay. It has to pay through its nose (7%) so as to attract savings. It has little foreign exchange to lay off in New York. In any case the interest rate there is paltry. So it operates in the red and limps along.
While battling with a diminished influx of foreign exchange, our Central bank has at last recognised the acute danger of FATCA and has tried to offer some hope. Here are three passages from Google that can help Barbadians to understand the dilemma.
http://ccmf-uwi.org/files/publications/working_papers/2016TWGDR.pdf
http://www.miamiherald.com/news/nation-world/world/americas/article89631922.html
http://www.centralbank.org.bb/de-riskingHere
While the governor has sought to downplay the impact on our international business the reality of the matter is that Barbados, despite its attributes, is becoming less relevant to offshore businesses, especially from Canada. So where does that leave us. The banks are not supporting businesses. Businesses now face stringencies on foreign exchange access, but there is carte blanche in the general use of foreign exchange. But you know Wild Coot, maybe the more restriction you impose the more problems you create. Just look at Jamaica.
• Harry Russell is a banker. Email: quijote70@gmail.com