Minister of Finance and the Public Service, Hon. Audley Shaw, used the occasion of the Bank of Jamaica’s (BoJ) 50th anniversary banquet on Thursday May 19 to bat for a more independent central bank.
Addressing the gala affair, held at the bank’s Nethersole Place headquarters downtown Kingston, the Minister expressed the Government’s commitment to the BoJ becoming autonomous, answerable only to Parliament.
He observed that given the bank’s critical role in the implementation of monetary policy, the country now has the base on which to build such an institution. “Central banks around the world are now more accountable to the public and to Parliament rather than ministers of government,” he noted.
The Minister said that the desire for low and stable inflation, if broadly agreed as a key ingredient to prosperity, should be institutionalised through central bank autonomy. He noted further that adequate safeguards for transparency and accountability could be enshrined in law, and the macroeconomic framework would help to moderate the impact of short-term fluctuations in normal values.
He said that critical to this development, is the achievement of fiscal balance, which would minimise the recurring bouts of instability in interest rates and the exchange rate fluctuation caused by efforts to finance the fiscal deficit. This, he added, was “the critical intersection between central government and central bank operations”.
Minister Shaw expressed the hope that this would become a reality within the next 10 years. “The realisation of these objectives will make the diamond anniversary in another 10 years even more satisfying than this golden anniversary,” he stated.
The concept of an independent central bank for Jamaica has been mooted from time to time, including a suggestion for the bank to be replaced or subsumed by a currency board.
Addressing the opening of the 12th annual Sir Arthur Lewis Institute of Social and Economic Studies Conference last month, Governor of the Bank, Brian Wynter, made a compelling case for, “a strong and autonomous central bank”, that is insulated from short-term political priorities both by its terms of reference and by its governance provisions.
“Its focus on low and stable inflation would be monitored by its reporting to Parliament and by its implementation of an inflation targeting regime, which has proven to be an effective anchor for inflation expectations in a growing number of industrial and developing countries,” Mr. Wynter stated.
He noted further that “it would retain responsibility for financial stability and would thus have the mandate and the wherewithal to respond to potential threats to stability before they arise and to support systemically significant entities where the need arises. Such an institution would be of our making, could achieve all of the goals that we think are important to our collective well-being and would see us through the next 50 years proudly holding Jamaican dollars in our wallets”.