BY Murli Dhar
Changing the Composition of the Monetary Policy Committee of the Bank of Mauritius
The Economic and Financial Measures (Miscellaneous Provisions) Act of 2012 came in the wake of the budget measures of 2013. This piece of legislation is usually made to amend or add to existing legislations to give effect to decisions announced in the budget speech.
Among the changes introduced, the Minister has caused certain changes to the composition of the Monetary Policy Committee (MPC) of the Bank of Mauritius. Before December 2012, the MPC had four members coming from the Bank of Mauritius (BoM), the remaining five being appointees of the Minister after consultations with the Governor. There was a good chance for the view of the Bank of Mauritius on the direction to be taken by the key interest rate of the Bank of Mauritius to prevail if one only of the directors appointed by the Minister was disposed to vote in favour of the Bank of Mauritius’ stand, in his/her own deliberate judgment.
As from December 2012, following amendment to the Bank of Mauritius Act 2004 (BoM Act) by the Economic and Financial Measures (Miscellaneous Provisions) Act 2012, the membership of the MPC has undergone a major change. Three members of the MPC will be from the central bank, two are appointed by the Prime Minister and three others by the Minister of Finance without consultations with the Governor of the Bank of Mauritius. In other words, members of the MPC appointed by the Minister are beholden only to him. They may, together with the two members appointed by the Prime Minister, overrule the BoM members in any future MPC decision.
Moreover, a new section 55 1A has been introduced in the BoM Act whereby “with a view to improving the coordination between monetary and fiscal policy, the Committee shall, in the discharge of its functions, take into account the views of the Bank, the Ministry and such other institution or organization as it considers appropriate”. This opens the road incursions being made by the fiscal authority into monetary policy making. There is an obligation for the MPC to adopt the view taken by the Ministry of Finance on setting the country’s interest rate structure each time the MPC meets. This new setup nullifies the usefulness of an independent monetary policy-making body instituted in the BoM by the BoM Act.
The independent interest setting function was placed in the BoM from its inception because normally central banks have to be seen to be above the diktats of Ministries of Finance for them to be nationally and internationally credible. As they don’t borrow from the market, central banks are inherently best placed not to seek to influence the interest rate structure with a view to lowering their interest rate burden on debt in their own favour.
In contrast, governments have recourse to borrowing on their own account from markets; this makes them a player on the market and hence eminently ineligible to determine the interest rate structure whether directly or indirectly through the appointment of nominees charged to execute the inclination of the Ministry in the MPC. Unlike the central bank, Ministries of Finance may want to lower their debt servicing charge each time by constantly reducing interest rates in the country. This is a likely practice which is fully opposed to the principle of good governance, especially when it comes to the operation of the key institutions of the country.
This new amendment to the BoM Act makes inoperative clause 55 3 of the Act i.e., “In the discharge of its functions, the Committee [MPC] shall not be subject to the direction or control of any other person or authority”. As we know, the BoM has been resisting – and rightly so – directives from the Ministry to bring down interest rates during the past year and more, as it has the wider public interest at heart.
When the Ministry of Finance will have virtually amalgamated with itself the MPC, after this amendment, the BoM (which has had an arduous time confronting at least one previous Finance Minister all out in favour of private sector hawks) will be yet another bastion of public resistance to fall at the call of what is called ‘Gros Capital’ in this country. It will be reduced to doing the bidding of the Ministry of Finance in its key decision-making policy without actually being physically absorbed in it. Such is the power of ‘Gros Capital’!
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Is the proposed High Court of Appeal to stand as an obstacle to making appeals to the Privy Council?
Information is circulating to the effect that the Supreme Court will have a distinct high court of Appeal to listen to appeals against judgements given out by judges. We don’t have details for now but it appears that judges who sit in the ordinary business of the Supreme Court or have responsibility for taking on cases coming to the court would be entitled to preside over the proposed appellate court.
One would have thought that it would have made better sense if the judges attending to the business of the high court of appeal were completely detached from those taking up cases from the benches in the ordinary course of business. Thus, on a purely operational level, the independence of the court of appeal would be established right from the start. The clear division of duties among the judges and their answerability to a higher authority in their clear lines of specialisation would not only be making sense. There would also be distinct hierarchies in each area with no risk of retaliation when and if the judges of court of appeal decided against the judgement given out in specific cases by their brothers on the other side of the fence.
At present, the delivery of justice in our judicial system is such that when a party is not satisfied with a decision given out by the Supreme Court, it has an authorised recourse for appeal to the Board of the Judicial Council (commonly referred to as the Privy Council). The track record of the decisions given out by the Privy Council is a strong one; it has unhesitatingly pointed out the errings of our learned judges whenever they have gone astray and it has confirmed their judgements when they have delivered decisions within the confines of law. The judges of the Privy Council have drawn attention to various precedents in case law which, had they been taken into account, would have led to altogether different decisions by our courts. In so doing, they have helped to advance local jurisprudence. Besides, they have always been a source of comfort to all to obtain as objective a treatment under law as possible.
For reasons like these, the Privy Council is seen as a final and fully independent battle-line whenever there have been feelings of miscarriage of justice. Without reflecting back on the current setup of the judiciary, we can say that there have been umpteen cases of biased decisions handed down by our courts, especially during colonial days. Risk of the sort is ever present. As Mauritius’ business base internationalises further, it is important to hold on to the Privy Council as our final court of appeal, putting in confidence international investors and the like that nothing less than the high standard of British justice will be meted out to them in the final recourse. This is the reason why, if a proper separate appeals division were to be added on to our judicial system, this court should not be seen as an obstacle to the direct recourse appellants have today to the Board of the Judicial Council. One might make it optional for appellants to choose between the proposed appeals court in Mauritius and the Board in the UK.
* Published in print edition on 12 January 2013