Former Governor Dr. Indrajit Coomaraswamy yesterday described the new Central Bank Act as a win-win for all stakeholders, hence much welcomed.
His comments follow economist Dr. Howard Nicholas during a recent television debate raised concerns over too much independence to the monetary authority via the new CBSL Act, the bill for which was gazetted by the Government recently and is slated to be tabled in Parliament this month.
“The elected Government sets the inflation target which provides the framework/objective of CBSL policies. In addition, the Governor will be expected to appear before Parliamentary Committees on a regular basis. These provide for oversight and accountability,” explained Dr. Coomaraswamy during whose tenor much progress was done in finalising the new Act.
“The CBSL has instrument autonomy (monetary and exchange rate policies) but overall policy (the inflation target) is set by the elected Government,” he added.
In addition, Dr. Coomaraswamy, emphasised that for transparency, the CBSL is required to produce an Inflation Report which will be expected to explain in detail how policies are formulated. These will initially be biannual and it is expected that they will eventually become quarterly.
“The CBSL Governor will also be expected to give a written explanation to the Finance Minister, if the inflation target is missed,” Dr. Coomaraswamy said adding that on missing the inflation target, “The Governor would be expected to write to the Finance Minister explaining why the target was missed and what remedial measures were being taken. The Finance Minister is expected to make this communication available to Parliament,” Dr. Coomaraswamy added.
FT