Keep the Central Bank out of politics

One again, political officials are sparring over the Central Bank, which is meant to be an independent institution.

Opposition Leader Kamla Persad-Bissessar on Saturday knocked Central Bank Governor Dr Alvin Hilaire for expressing optimism about the future last Thursday.

“Given the severity of our economic crisis, one wonders what inspires this ‘optimism’ expressed by the Central Bank Governor,” Ms Persad-Bissessar said in a prepared statement. “He either clearly doesn't read his own reports or wishful thinking has replaced data-driven monetary policy at the Central Bank.”

In response, Finance Minister Colm Imbert accused Ms Persad-Bissessar of being reckless.

“The Opposition Leader has recklessly criticised the Central Bank for being too close to the PNM,” Mr Imbert tweeted. “The Central Bank is responsible for managing interest rates, reserves, money supply, inflation etc. It is doing this well. What does she want instead – devaluation, a UNC governor, or mayhem?”

The Central Bank is no sacred cow. It is independent but it is accountable to the people. Citizens are entitled to raise questions about its functioning, such as in relation to its use of regulatory powers to prevent the emergence of systemic risks. Too often have questions been raised in the past about this issue alone.

In this instance, what the Central Bank governor actually said was more measured than suggested.

“We have a lot to do,” Mr Hilaire said. “We are optimistic of the future. We have the right capacity. What we want is a durable exit from this pandemic. That is the fundamental thing that we need to have.”

This is far from a rosy picture. But the Opposition Leader went further and suggested Mr Hilaire was a “willing accomplice to the Minister of Finance” who had remained silent on too many matters.

Truth be told, none of the parties have done much to strengthen independent institutions in this country so that claims like Ms Persad-Bissessar’s could be a thing of the past.

Appointment of independent officials and the control of their terms of employment, funding and powers all remain within reach of the cabinet.

A good reminder of this was Mr Imbert’s own move to change the term of the Central Bank governor from five years to a range of three to five years.

Mr Imbert said this was because potential appointees, many of whom are elderly, have baulked at the prospect of five-year terms.

But another way of looking at the change, done with a sitting governor in place, was that it was a reminder of the power of the executive. Some might say this now makes any governor potentially subject to punitive curtailment of their tenure.

Memories of legal wrangling between a former governor and the government also bring this dynamic to the fore.

A lot of the work of the Central Bank is done by technocrats who have nothing to do with the governor, who, in turns, relies on their work.

But it seems the real work of institution strengthening, which should be a project of all governments, is what’s being neglected.