Barriers and Opportunities for Enhancing Capital Flows
In the COMCEC Member Countries
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 Design and effectiveness of existing controls
 Ability of the financial and non-financial sectors to handle large, volatile capital flows
and to manage risks related to international capital flows and exchange rate flexibility
 Authorities’ capacity to efficiently administer and enforce controls
The IMF is playing an increasing role in providing advisory services to countries in the process
of undertaking capital account liberalisation.
Treaty on the Functioning of the European Union
The third international framework is the Treaty on the Functioning of the European Union
(TFEU), which establishes the free movement of capital as a binding obligation among
members of the EU, as well as between EU members and third countries. Article 63 of the
Treaty stipulates that “all restrictions on the movement of capital between Member States and
between Member States and third countries shall be prohibited”.
Similarly to the OECD Code, the Treaty contains a number of exceptions. These exceptions
allow countries to withhold pre-existing restrictions (Art. 64 (1) TFEU) and to introduce
restrictive measures if justified by public policy or public security reasons (Art. 65 (1b) TFEU).
Nevertheless, the European Court of Justice has made it clear in its rulings that these
exceptions must be “construed narrowly and the measures taken must be suitable,
proportionate, transparent, and subject to judicial review” and “those grounds must…be
interpreted strictly, so that their scope cannot be determined unilaterally by each Member
State without any control by the Community institutions”.52 These provisions have yet to be
used in the history of the EU.
3.1. APPLICABILITY OF FRAMEWORKS AMONG THE COMCEC MEMBER
COUNTRIES
In its 2012 Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER),
which assesses exchange and trade arrangements, the IMF highlights an easing of measures
limiting foreign transactions among its member countries. According to the report, the number
of IMF member countries accepting the obligations of Article VIII, Sections 2(a), 3, and 4,
increased to 168 when Mozambique accepted them as of May 2011.53 Restrictions have
continued to decline, current account openness has increased, and a number of changes have
been effected in a broader effort to strengthen countries’ financial regulatory frameworks,
implementing lessons learned from the financial crisis and addressing capital flow volatility
risk.
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