Murli Dhar

Letter from an avowed non-conformist

Freed from undue intrusion, the BoM should be able to do even better in the delivery of a balanced responsibility for its portfolio, not in the interest of one group but in the interest of the nation as a whole

MURLI DHAR

The Governor of the Bank of Mauritius (BoM) forwarded his letter to stakeholders on 4th February last. In it, he has traced back the evolution of the Bank during the last five years, setting out the numerous challenges he faced on the way towards improving the efficiency of the domestic financial system and attempting to give Mauritius a pride of place as an international financial centre.

Manou Bheenick is probably the Governor of the Bank who has faced the biggest barrage of obstacles in his mission to achieve the vision he has of the Bank of Mauritius. Not only was he taken to task by private sector facile-solution seekers, ever keen to get interest rates down and the rupee depreciated, but he also had the singular distinction to have to fight it up against a part of the local media out to voice out the wishes of the private sector to which it appears to be beholden rather than to the community as a whole.

In his letter, the Governor states that he has also had to face resistance from the Ministry of Finance – though not in so many words — when he could not bring himself up to accommodate the demands of the private sector, irrespective of the damaging effect that could have had both as regards the inflation that would have been consequently inflicted on the public as well as increasing the fragility of the domestic banking system. This is not surprising. From the 2007 crisis when Manou Bheenick took over as Governor of the BoM, central banks the world over have been called upon to undo a lot of the mistakes that governments helped create in various economies of the world. Anything going wrong could from here be ascribed to their doing or not doing what was “appropriate”. They have been walking on the razor’s edge.

Now, as far as anyone can make out, Manou Bheenick is not a conformist chiefly as regards bending to the whims and caprices of interested parties who look to policy decisions from their distinct limited perspectives. He also includes in his mission the right to defend the less well-off members of the population on whom the axe of inflation falls more sharply than on anybody else. Unlike past managements of the Bank, he has confronted ministers head on when defending the positions of the more vulnerable 99% “others” just as well as fending for advancing the interest of Mauritius as a respected jurisdiction.

His letter sets out the various fights  he has delivered to change the stage so that the central bank not only gets its own voice heard when it comes to crucial decisions but also to reinvent the Bank itself as occasion demands. What all this boils down to is whether one wants to go for facile decisions to please vested interests or whether one looks beyond the immediate horizon to avoid distorting the stage for good, leaving it into the hands of patented manipulators who only have their private interests and threats to deliver.

When the BoM was set up as the country’s central bank, it was the intention of the colonial government that the Bank’s expert view in its field of expertise should be listened to even though that smacked of granting to it the necessary independence and autonomy vis-à-vis the powers that be. This spirit has not always been respected by those who have successively been given the stewardship of the Bank. Manou Bheenick takes it head on, conscious of his bigger responsibility as head of a prime institution of the country. The Governor spells it out in his letter of February 4th to stakeholders that structural deficits in the economy need to be addressed. Anybody who knows what the business of central banks consists of will also know that addressing this kind of issue is not exactly the kettle of fish of the central bank. The central bank may however play a “developmental” role to make this happen when the initiatives to this effect are taken in the concerned corridors of power.

The BoM can carry out its mission with regard to strengthening the financial sector by increasing the stability of the local financial system. The more the central bank is transparent in the actions it undertakes under this chapter, the more effectively it can implement its decisions in the national interest. Over the past five years, it has been addressing this task both with and without hurdles being placed on its way. It is by going in this direction that the Bank’s Monetary Policy Committee (MPC) was put in place under Manou Bheenick in 2007 although the legislation had provided for its establishment as far back as 2004.

Now that the MPC has been making itself ever more accountable publicly, the Bank has once again become a respected cornerstone of the country’s policy-making equipment. It is very important that the Bank has been gaining back its credentials over the past five years, which were sorely dented when the MCB/NPF scandal erupted in 2003 with nobody being able to formulate a constructive insight into how things went wrong in our of our most systemically important banks and on whom the whole responsibility for mismanaging the situation should lie.

A lot of work has gone into the making of the BoM since the last 45 years. It is one of the few institutions of the country which, despite having a huge amount of national responsibility to carry, has not faltered in its undertaking in the past preceding years of international crisis when several non-financial public institutions fared rather not too well, being caught up in a tumultuous track. Freed from undue intrusion, the BoM should be able to do even better in the delivery of a balanced responsibility for its portfolio, not in the interest of one group but in the interest of the nation as a whole.

MURLI DHAR

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