It is surprising !!! When asked about the appointments at the BOM, they-especially the politicians- answered by a "No comments". Are they not concerned about one of our prime institutions - the Central Bank ? You cannot go about sacking and appointing people just like that ; such an institution needs ,at its helm, distinguished economists and analysts from the top league not from the lower divisions.
Many of the previous governors and deputies were selected from the top echelons of the Minsitries of Finance and/or Economic Development or from the research department of the BOM-one of those few units in Mauritius that undertakes fundamental research and analysis of economic and policy issues. Just because you have a degree in economics does not qualify you for these posts. These jobs demand more applied knowledge and are very specialised.
One has to be constantly in touch if one has to lead the institution, without being outsmarted by junior officers , in meeting the present challenges which have to do with more than financial stability given the increasing concerns on the stabilisation of the volatility of the exchange rate, the excessive build up in the stock of foreign reserves , the sterilisation the large excess liquidity in the system, the closing of the spread between the interbank interest rates and the KRR for an effective monetary policy transmission mechanism including the pressures for a tightening of the monetary policy, an upward adjustment to the interest rates , the increasing cost of sterilisation for the Central Bank and the cost of servicing of debt for Government.
We were expecting the appointment of some heavy-weights with wide economic expertise to lead us through the difficult days ahead not some raw ones still struggling up the learning curve and quite mesmerised by blockchain, fintech, crypto-currencies while incompetently and irresponsibly allowing the financial sector to be greylisted. We were also hoping that there would have been greater efforts at maintaining the autonomy of the BOM as its horizons extend far beyond government’s short term objectives or the immediate objective of elections which the government could have been guided by.
Unfortunately not much has changed. It is the Prime Minister and the Minister of Finance who appoints the Governor and deputy governors and chooses who shall sit on the Board of the Bank without any provision for checks and balances or for institutional independence, that is, from direct political or governmental influence in the conduct of the affairs of the Bank. How many of the nominess will go all the way to ensure the Bank’s independence in pursuing price and financial stability and preserve its credibility for the proper conduct of monetary policy and object to the opening of its floodgates to excessive money financing to Government ?
You do recall the mismanagement of the BAI bubble or Ponzi and the more recent use of the Special Reserve Fund (SRF) to pay debt without a prior review of the economic capital framework of the central bank, the replenishment of the SRF through valuation gains engineered by BOM interventions to depreciate the rupee and the pressure being put on banks to align their rates to the BOM pre-determined rates which were some of the misdoings that conflicted with the principle of central bank independence, and with the Bank’s goal of price and financial stability. We thought that the ex-Governor -who had become a mere rubber stamp for Government – would give way to some high calibre performer who would have restored some of the credibility and the independence of the Central Bank. No, on the contrary we saw the consolidation of “L’État-MSM pendant les 100 premiers jours.”
