Open letter calls for smart debate on Bank’s duties
Influential academics and economists have written an open letter, calling for a halt to attacks on the Reserve Bank and asked that debates on its mandate be conducted by experts in the open.
Altogether 76 academics and economists — among them Neva Makgetla, Lumkile Mondi and Steven Friedman — said Public Protector Busisiwe Mkhwebane’s remedial action for the Bank’s apartheid-era lifeboat to Bankorp was “startling”.
Mkhwebane has directed Parliament to amend the Reserve Bank’s constitutional mandate to focus on the socioeconomic wellbeing of citizens, from its current one of protecting the value of the currency in the interests of balanced and sustainable economic growth, a move that the Reserve Bank has taken on judicial review.
“In no case that we are aware of is a central bank’s mandate spared the responsibility of price stability, however phrased, whatever other objectives are included,” they said. “To exclude price stability from a central bank’s objective in favour of some poorly conceived reference to ‘socioeconomic wellbeing’ is incomprehensible and plainly irresponsible.”
The “unexpected and unwarranted” remedial action raised questions about what mandate was appropriate for a central bank in an emerging economy such as SA, which was a complex debate, they said.
“Some academics and economists will be pleased with the exclusive price stability mandate of the Reserve Bank.
“Others will argue for a broader mandate, including growth and employment, alongside price stability.”
The group said some combination of price stability, growth and employment was in the mandate of the US Federal Reserve and the Reserve Bank of Australia, among others.
IN NO CASE IS A CENTRAL BANK’S MANDATE SPARED THE RESPONSIBILITY OF PRICE STABILITY
At Reserve Bank had not responded to questions regarding the open letter at the time of publication.
The Reserve Bank sets and implements monetary policy, with its inflation target set and agreed to with the government. It also supervises the banking sector, manages the national payment system and issues banknotes and coins, among other responsibilities.
The group of academics and economists said a debate about the Reserve Bank’s mandate would have to be properly constituted and conducted through the proper institutions, such as a parliamentary inquiry in which expert testimony and international experience would be aired.