Pledge of independence
Thursday, July 19 2012
ALMOST immediately following on Friday’s announcement by Prime Minister Kamla Persad-Bissessar that Cabinet had taken the decision to appoint economist Jwala Rambarran as Governor of the Central Bank, Rambarrran in an interview with Newsday would pledge to build on the foundation left by the former Governor Ewart Williams as well as ensure that the Bank would remain an independent institution, free from political influence. Moments prior to the announcement Williams was insisting that whoever was his successor should keep a “respectful distance” from whatever the Government of the day. “Be careful of your independence,” Williams cautioned.
Business Day looks forward to the new Central Bank Governor maintaining the tradition of the need for the Bank’s monetary policy to remain independent of Government and its financial policy. At the outset, Rambarran is faced with the difficulties pointed out recently by his predecessor Williams that Trinidad and Tobago (TT) was not likely to experience significant economic growth, even if new natural gas and crude oil reserves were to be discovered within the next few years.
It is a troubling situation which will present a great challenge for Rambarran. Williams, who had stated the above in his last major interview before demitting office, pointed out that recently appointed Minister of Finance and Economy, Larry Howai, would “have to do all he could to encourage as much private sector activity in the country as possible”. We emphasise Williams’ point because what has emerged during thecountry’s economic reversal was that although with the repo rate set by the Central Bank at three per cent and, consequently, commercial banks setting their prime interest rate at 3 per cent, there has been relatively minimal borrowing for expansion of existing businesses or the creation of new business.
How Rambarran deals with this situation, in a bid to increase commercial activity, is of critical import as it follows that the money flow, the turning around of money within the economy, is of greater significance than the actual stock of money. Rambarran, undoubtedly, will have high on his priority list the tackling of the high level of liquidity in the system which has resulted from the continuing international financial crisis. The effect of the crisis has been further aggravated by cheaply produced commodities from the Far East.
Goods and services produced here are less competitive than those from China and India, as we pointed out in earlier editorials, not only on the international market, but in the regional and domestic markets as well. Rambarran may have had a first hand view of India’s low cost production methods when he was part of the group which accompanied the Prime Minister on her recent trip to India.
While this country’s balance of trade position may have been made less uncomfortable by its rate of exchange, its fuel subsidy and Caricom’s15 per cent Common External Tariff, crucial Central Bank strategies will need to be developed and put into effect. Already, the new Central Bank Governor has identified management of foreign exchange and inflation as two areas in which he hopes to work closely with Howai.
Rambarran brings to the governorship of the Central Bank crucial pluses. These embrace, as the PM would note, “extensive knowledge and experience of contemporary global and economic and financial issues”. Governor Rambarran was named among the top 50 alumni at theUniversity of the West Indies’ St. Augustine Campus for their contribution to Caribbean economic development.