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BOJ to be freed from political control, says Clarke

Senior staff reporter

Friday, July 27, 2018

JAMAICA'S central bank, the Bank of Jamaica (BOJ), is to be freed from the directional control of the country's political leadership by the end of 2018.

This was disclosed by Minister of Finance and the Public Service Dr Nigel Clarke in a speech yesterday at the Jamaica Pegasus in Kingston, on enhancing Jamaica's fiscal responsibility framework and securing gains made from economic ties with the International Monetary Fund (IMF).

In the lengthy speech to fiscal stakeholders and the media Clarke noted that he had already announced plans for the creation of a key pillar in the Government's policy of achieving economic independence in the Cabinet's approval of proposals for an independent fiscal council to give legislative and institutional permanence to the country's fiscal principles.

However, he said that the design of the institutional framework to deliver economic stability consistently well into the future would require a second major pillar.

“I am pleased to advise that work to erect that second key pillar of Jamaica's economic independence has been put into motion,” he stated.

“A few weeks ago, Cabinet gave its approval to detailed proposals for the modernisation of the central bank through amendment of governing legislation,” he announced.

He said that the proposals would amend the Bank of Jamaica Act, the Banking Services Act and the Public Bodies Management and Administration Act, and enable the issuance of new governance regulations for the BOJ.

“These legislative changes would follow changes in recent years, in keeping with international best practices,” he added.

He noted that in 2014 the BOJ was made autonomous, with respect to banking supervision, with the passage of the Banking Services Act; and, in 2015, the central bank's mandate was expanded to include responsibility for the maintenance of overall financial system stability.

Dr Clarke pointed out that the mandate of the central bank currently consists of multiple goals, which are sometimes in conflict. However, he noted that, by institutional design, the Jamaican monetary authorities will pursue low, stable and predictable inflation as the exclusive monetary policy goal.

“As a result, market participants and investors suffer from a lack of clarity around the central bank's intent and actions. This has a cost. Going forward, the principal monetary policy goal of the central bank will be to achieve an inflation target, and all other tools and indicators will be subordinated to this aim,” he explained.

He said that the reform will require the governor to submit to Parliament and publish policy statements on its monetary policy performance, as well as its achievements in relation to the inflation target and a monetary policy update.

Opposition spokesman on finance, Mark Golding, who was among the audience and asked several questions, wanted to know if the Government would table a green paper in Parliament for wider discussion on the approach prior to the tabling of the Bills to institute the changes.

“You know that it is an (IMF) structural benchmark and we intend to table it and we need to get it passed in good time. The Bills obviously being in Parliament, there will be opportunity for debate and for views to be heard,” Clarke said.