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Foreign exchange controls are various forms of controls imposed by a government on the purchase/sale of foreign
currencies A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" in the most specific sense is money in any form when in use or circulation as a medium of exchange, especially circulating banknotes and coins. ...
by residents, on the purchase/sale of
local currency In economics, a local currency is a currency that can be spent in a particular geographical locality at participating organisations. A regional currency is a form of local currency encompassing a larger geographical area, while a community currenc ...
by nonresidents, or the transfers of any currency across national borders. These controls allow countries to better manage their economies by controlling the inflow and outflow of currency, which may otherwise create
exchange rate#REDIRECT Exchange rate#REDIRECT Exchange rate {{Redirect category shell, 1= {{R from other capitalisation ...
{{Redirect category shell, 1= {{R from other capitalisation ...
volatility. Countries with weak and/or developing economies generally use foreign exchange controls to limit
speculation Speculation is the purchase of an asset (a commodity, goods, or real estate) with the hope that it will become more valuable in the near future. In finance, speculation is also the practice of engaging in risky financial transactions in an att ...
against their currencies. They may also introduce
capital controls Capital most commonly refers to: * Capital letter, an upper-case letter in any type of writing * Capital city, the area of a country, province, region, or state, regarded as enjoying primary status, usually but not always the seat of the governm ...
, which limit foreign investment in the country.


Rationale

Common foreign exchange controls include: * banning the use of
foreign currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" in the most specific sense is money in any form when in use or circulation as a medium of exchange, especially circulating banknotes and coins. ...
within the country; * banning locals from possessing foreign currency; * restricting currency exchange to government-approved exchangers; *
fixed exchange rate A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime in which a currency's value is fixed or pegged by a monetary authority against the value of another currency, a basket of other currencies, or another ...
s * restricting the amount of currency that may be imported or exported; Often, foreign exchange controls can result in the creation of
black market Barcelona 2015 A black market, underground economy or shadow economy, is a clandestine market or series of transactions that has some aspect of illegality or is characterized by some form of noncompliant behavior with an institutional set o ...
s in currencies. This leads to a situation where the actual demand for foreign currency is greater than that which is available on the official market. As such, it is unclear whether governments have the ability to enact effective exchange controls.


History

Foreign exchange controls used to be common in most countries. For instance, many western European countries implemented exchange controls in the years immediately following World War II. The measures were gradually phased out, however, as the post-war economies on the continent steadily strengthened; the United Kingdom, for example, removed the last of its restrictions in October 1979. By the 1990s, there was a trend toward free trade and globalization and
economic liberalization Economic liberalization (or economic liberalisation) is the lessening of government regulations and restrictions in an economy in exchange for greater participation by private entities. In politics, the doctrine is associated with classical liberal ...
. In France, exchange controls started after the First World War. It then reappeared between 1939 and 1967. After a very short interruption, exchange controls were restored in 1968, relaxed in 1984, and finally abolished in 1989. La politique de change de la France des années 1980
, sur ''aesplus.net'' (consulté le 1er mai 2011)
Other countries that formerly had exchange controls in the modern period include: *
Argentina Argentina (), officially the Argentine Republic ( es, link=no, República Argentina), is a country located mostly in the southern half of South America. Sharing the bulk of the Southern Cone with Chile to the west, the country is also bordered by ...
- between 2011 and 2015, and from 2020 *
Egypt Egypt ( ; ar, مِصر ), officially the Arab Republic of Egypt, is a transcontinental country spanning the northeast corner of Africa and southwest corner of Asia by a land bridge formed by the Sinai Peninsula. Egypt is a Mediterranean count ...
- until 1995 *
Finland Finland ( fi, Suomi ; sv, Finland , ), officially the Republic of Finland (, ), is a Nordic country located in Northern Europe. It shares land borders with Sweden to the west, Russia to the east, Norway to the north, and is defined by the Gul ...
- until 1990 *
Israel Israel (; he, יִשְׂרָאֵל; ar, إِسْرَائِيل), officially known as the State of Israel ( he, מְדִינַת יִשְׂרָאֵל, '), is a country in Western Asia, located on the southeastern shore of the Mediterranean Se ...
- until 1994 *
Republic of China Taiwan (), officially the Republic of China (ROC), is a country in East Asia. Neighbouring countries include the People's Republic of China (PRC) to the northwest, Japan to the northeast, and the Philippines to the south. The main island of Ta ...
- until 1987 *
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain,Usage is mixed. The Guardian' and Telegraph' use Britain as a synonym for the United Kingdom. Some prefer to use Britain as shortha ...
- until 1979


Current examples

Today, countries with foreign exchange controls are known as "Article 14 countries", after the provision in the
International Monetary Fund The International Monetary Fund (IMF) is an international financial institution, headquartered in Washington, D.C., consisting of 190 countries working to foster global monetary cooperation, secure financial stability, facilitate international ...

International Monetary Fund
's Articles of Agreement, which allows exchange controls only for " transitional economies". *
Algeria ) , image_map = Algeria (centered orthographic projection).svg , map_caption = , image_map2 = , capital = Algiers , coordinates = , largest_city = capital , religion = , official_languages = , languages_type = Other languag ...
*
Angola , national_anthem = "Angola Avante"() , image_map = , map_caption = , capital = Luanda , religion = , religion_year = 2015 , religion_ref = , coordinates = , largest_city = capital , official_la ...
*
Argentina Argentina (), officially the Argentine Republic ( es, link=no, República Argentina), is a country located mostly in the southern half of South America. Sharing the bulk of the Southern Cone with Chile to the west, the country is also bordered by ...
*
Armenia Armenia (; hy, Հայաստան, translit=Hayastan, ), officially the Republic of Armenia,, is a landlocked country located in the Armenian Highlands of Western Asia.The UNbr>classification of world regions places Armenia in Western Asia; the ...
*
Bahamas The Bahamas (), known officially as the Commonwealth of The Bahamas, is a country within the Lucayan Archipelago of the West Indies in the Atlantic. It takes up 97% of the Lucayan Archipelago's land area and is home to 88% of the archipelago' ...
*
Barbados Barbados is an island country in the Lesser Antilles of the West Indies, in the Caribbean region of North America, and the most easterly of the Caribbean Islands. It is in length and up to in width, covering an area of . It is in the weste ...

Barbados
*
Belarus , image_map = , map_caption = , capital = Minsk , coordinates = , largest_city = capital , official_languages = , languages2_type = Recognized minority language , languages2 = , ethnic_groups = , demonym = Belarusian , government_type = U ...
*
Cameroon Cameroon (, french: Cameroun), officially the Republic of Cameroon (french: République du Cameroun, links=no), is a country in west-central Africa. It is bordered by Nigeria to the west and north; Chad to the northeast; the Central African R ...
*
China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population of around 1.4 billion. Covering approximately 9.6 million square kilometers (3.7 million m ...
*
Cuba Cuba ( , ), officially the Republic of Cuba ( es, República de Cuba, links=no ), is a country comprising the island of Cuba, as well as Isla de la Juventud and several minor archipelagos. Cuba is located in the northern Caribbean where the Car ...
*
Ethiopia Ethiopia (; am, ኢትዮጵያ, , aa, Itiyoophiyaa, gez, ኢትዮጵያ, om , Itoophiyaa, so, Itoobiya, ti , ኢትዮጵያ), officially the Federal Democratic Republic of Ethiopia, is a landlocked country in the Horn of Africa. It shar ...

Ethiopia
*
Ghana Ghana (), officially the Republic of Ghana, is a country in West Africa. It spans along the Gulf of Guinea and the Atlantic Ocean, sharing borders with the Ivory Coast in the west, Burkina Faso in the north, Togo in the east, the Gulf of Guine ...
*
India India (Hindi: ), officially the Republic of India (Hindi: ), is a country in South Asia. It is the second-most populous country, the seventh-largest country by land area, and the most populous democracy in the world. Bounded by the Indian Oce ...

India
*
Iran Iran ( fa, ایران ), also called Persia and officially the Islamic Republic of Iran ( fa, جمهوری اسلامی ایران ), is a country in Western Asia. It is bordered to the northwest by Armenia and Azerbaijan, to the north by ...
*
Libya Libya (; ar, ليبيا, Lībīyā), officially the State of Libya, ( ar, دولة ليبيا, Dawlat Lībīyā) is a country in the Maghreb region in North Africa bordered by the Mediterranean Sea to the north, Egypt to the east, Sudan to the sout ...
*
Morocco ) , image_map = Morocco (orthographic projection, WS claimed).svg , map_caption = Location of Morocco in northwest Africa.Dark green: Undisputed territory of Morocco.Lighter green: Western Sahara, a territory claimed and occupied mostly by Moro ...
*
Myanmar Myanmar (; my, မြန်မာ ) or Burma ( my, ဗမာ ), officially the Republic of the Union of Myanmar, is a country in Southeast Asia. Myanmar is bordered by Bangladesh and India to its northwest, China to its northeast, Laos and ...
*
Mozambique Mozambique (), officially the Republic of Mozambique ( pt, Moçambique or , ; ny, Mozambiki; sw, Msumbiji; ts, Muzambhiki), is a country located in Southeastern Africa bordered by the Indian Ocean to the east, Tanzania to the north, Malawi and ...
*
Namibia Namibia (, ), officially the Republic of Namibia, is a country in Southern Africa. Its western border is the Atlantic Ocean; it shares land borders with Zambia and Angola to the north, Botswana to the east and South Africa to the south and eas ...
*
Nepal Nepal (; ne, नेपाल ), officially Nepal, is a sovereign country in South Asia. It is mainly in the Himalayas, but also includes parts of the Indo-Gangetic Plain. It is the 49th largest country by population and 93rd largest country by ...
*
Nigeria Nigeria (), officially the Federal Republic of Nigeria, is a country in West Africa. It borders Niger in the north, Chad in the northeast, Cameroon in the east, and Benin in the west. Its southern coast is on the Gulf of Guinea in the Atlanti ...
*
North Korea North Korea (Korean: /, MR: ''Chosŏn''; literally /, MR: ''Pukchosŏn'', or /, RR: ''Bukhan'' in South Korean usage), officially the Democratic People's Republic of Korea (DPRK or DPR Korea; Korean: /, ''Chosŏn Minjujuŭi Inmin Kong ...
*
Russia Russia (russian: link=no, Россия, , ), or the Russian Federation, is a country spanning Eastern Europe and Northern Asia. It is the largest country in the world, covering and encompassing more than one-eighth of the Earth's inhabited l ...
*
Samoa Samoa (), officially the Independent State of Samoa ( sm, Malo Saʻoloto Tutoʻatasi o Sāmoa; sm, Sāmoa, ) and until 1997 known as Western Samoa, is a Polynesian island country consisting of two main islands (Savai'i and Upolu), two smaller, ...
*
South Africa South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. With over 59 million people, it is the world's 23rd-most populous nation and covers an area of . South Africa has three capital cities: e ...
*
Sudan Sudan (; ar, السودان, as-Sūdān), officially the Republic of the Sudan ( ar, جمهورية السودان, link=no, Jumhūriyyat as-Sūdān), is a country in Northeast Africa. It is bordered by Egypt to the north, Libya to the northwest, ...
*
Tunisia ) , image_map = Tunisia location (orthographic projection).svg , map_caption = Location of Tunisia in northern Africa , image_map2 = , capital = Tunis , largest_city = capital , coordinates = , official_languages = Arabic Translation by the Uni ...

Tunisia
*
Ukraine Ukraine ( uk, Україна, Ukraina, ) is a country in Eastern Europe. It is the second-largest country in Europe, after Russia, which it borders to the east and north-east; it also shares borders with Belarus to the north; Poland, Slovakia a ...
*
Uzbekistan Uzbekistan (, ; uz, Ozbekiston, ), officially the Republic of Uzbekistan ( uz, Ozbekiston Respublikasi), is a landlocked country in Central Asia. It is surrounded by five countries: Kazakhstan to the north; Kyrgyzstan to the northeast; Tajikistan ...
*
Venezuela Venezuela (; ), officially the Bolivarian Republic of Venezuela ( es, link=no, República Bolivariana de Venezuela), is a country on the northern coast of South America, consisting of a continental landmass and many islands and islets in the Ca ...
*
Zimbabwe Zimbabwe (), officially the Republic of Zimbabwe, is a landlocked country located in Southern Africa, between the Zambezi and Limpopo Rivers, bordered by South Africa to the south, Botswana to the south-west, Zambia to the north, and Mozambi ...

Zimbabwe


See also

*
Currency transaction tax A currency transaction tax is a tax placed on the use of currency for various types of transactions. The tax is associated with the financial sector and is a type of financial transaction tax, as opposed to a consumption tax paid by consumers, thou ...
* Financial transaction tax * Spahn tax * Sterling Area * Tobin tax


References

{{refs Foreign direct investment Monetary hegemony Price controls Protectionism