FOREIGN EXCHANGE CONTROL IN CANADA, 1939-51

Abstract

SHORTLY after the outbreak of war in 1939 foreign exchange control was imposed to maintain exchange stability and to conserve Canada's reserves and prospective receipts of foreign exchange so that they might be used in the first instance for purposes deemed to be in the national interest. An ancillary objective related to war financing was to prevent the demoralization of Canadian securities markets through panic sales by non-residents in moments of crisis. While the control was directed essentially against exports of capital by residents and non-residents, the instruments of control applied equally to current and capital transactions and the power given to the Board of regulating current transactions was exercised restrictively on occasion, notably in the case of travel. Of necessity the machinery of control was elaborate because it had to be all-embracing but it rested on five basic rules: (1) Permits were required for payments by residents to non-residents. (2) Permits were required for the export of funds by travellers. (3) Permits were required for change of status from resident to non-resident. (4) Residents were required to sell to an authorized dealer all foreign exchange accruing to them. (5) Payment in an appropriate manner and in a currency designated by the Board was required for exports of goods, services, and securities, and for anything of value transferred from a resident to a non-resident whether in Canada or abroad.