Description:
What is called convertibility ? Convertibility has a host of different meanings or degrees whether it refers to residents or to non-residents. For residents, full convertibility implies the freedom to import goods and services and to export capital. The extend of quantitative import restrictions and for exchange control determines the precise degree of convertibility. For non-residents, full convertibility implies the freedom to transfer balances on current and on capital accounts. More or less rigid blocking of balances determines the exact degree of convertibility here too. Besides the limitations on convertibility that depend on the type of financial operation, then may also be geographical limitations : payments’ arrangements may be bilateral, multilateral within a certain area or multilateral over the whole world. Any further move towards convertibility that is not accompanied by a wider liberalisation of trade would be of little value.