The following story is being published exclusively in Jamaica by the Jamaica Observer with the permission of the London-based Central Banking Publications, who published it first. As the story indicates, independence for Bank of Jamaica is not just a big deal for Jamaica, but is in fact a game-changer for the entire Caribbean.
Granting the Bank of Jamaica operational independence to pursue an inflation target could transform central banking in the Caribbean
Jamaican politicians are currently reflecting on whether or not to push ahead with a promise to pass legislation that would grant operational independence to the Bank of Jamaica to pursue an agreed inflation target.
Should they move forward with their commitment to institute legislation in October, it could trigger a trend towards central bank independence in the Caribbean region, so bringing to an end British, Spanish, French and Dutch colonial-era central bank laws.
The Bank of Jamaica Act, for example, was introduced in 1960, a full two years before the country gained independence from Britain — and nearly four decades ahead of the Bank of England being granted legal independence in the UK. While there have been many amendments, none of them live up to the independence legislated for the Bank of England and the European Central Bank.
The Bank of Jamaica is currently working “closely” with the Ministry of Finance “on the detailed proposals” that would “need to inform the legislative amendments”, Bank of Jamaica Governor Brian Wynter tells Central Banking Journal in an in-depth interview published in May. “The Government has committed publicly that it would take those amendments to Parliament in October.”
CLARITY OF PURPOSE
At present, central banks in the region have wide-ranging mandates, often including currency issuance and redemption, credit supply, monetary and exchange rate stability, financial stability, money and capital market development, welfare-related policies, as well as acting as bankers and advisers to their governments.
The range of activities can make some central banks inherently more political in nature than those pursuing narrow price-stability targets. As a result, tensions can emerge, even between well-regarded central bank governors and their governments.
The dismissals of DeLisle Worrell at the Central Bank of Barbados and Jwala Rambarran at the Central Bank of Trinidad and Tobago in the past 30 months highlight the issue. There is a lingering suspicion they were both removed on exaggerated charges for largely political reasons — and both have vigorously contested their dismissals.
An opportunity now exists for Jamaica to clearly define the role of the central bank, its governor and its officers. The days of removing a central bank governor via an ambassadorial ‘promotion’ or trumped-up charges need to end. Either the central bank is overtly a political entity or it is independent with a limited mandate and measurable accountability.
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