The BOM-SBM Crisis: What Happened to Institutional Maturity?

Editorial

For more than five decades, the Bank of Mauritius (BOM) has served as the anchor of the Mauritian economy. Established in 1967, modelled on the rigorous traditions of the Bank of England, the BOM was tasked with two fundamental duties: maintaining the value of the rupee and fostering a robust financial sector to support the nation’s development.

The BOM has largely fulfilled this mandate, playing a transformative role in helping Mauritius overcome serious economic challenges and transition to a diversified economy capable of hosting international financial activities. However, this track record has recently been marred by the dilapidation of the Bank’s reserves by the preceding government and the scandals relating to the disbursements by the Mauritius Investment Corporation (a creation of the BOM) to corporate cronies.

However, the BOM’s contributions to Mauritius’s economic journey are undeniable. In a country that confronted significant economic challenges and needed to transition from a mono-crop economy, the central bank reportedly played a key guiding role. It has also successfully steered the financial sector through the “rough and tough” of frequent global market turmoil, prudently ensuring that emerging sectors received the necessary funds for growth and diversification.

The BOM’s historical effectiveness lay in its adherence to “strict codes of conduct” and a reputation for “no-nonsense regulation.” It has consistently resisted aggressive demands from private sector lobbies and occasionally politicians, proving its commitment to the public interest. This discipline has been the bedrock of confidence in the Mauritian financial system.

The Current Crisis: Independence on Trial

Despite this track record, the BOM’s current operations appear clouded by a significant governance issue, centred on the State Bank of Mauritius (SBM). The SBM, which has lost approximately Rs 15 billion in the last decade and is without a functioning board or CEO, urgently requires leadership. The proposed nomination of Manou Bheenick as SBM Chairman, a move seemingly intended to stabilize the bank, has been allegedly blocked by the BOM.

According to press reports, the reason — that Manou Bheenick would not be “fit and proper” due to a lawsuit against the BOM — has allegedly been challenged by the BOM’s Second Deputy Governor, Gérard Sanspeur, and legal experts who argue that Bheenick’s right to seek legal redress is constitutional. The assertion that this block is “irrational” and “ultra vires” (an abuse of power) raises serious alarms.

The conflict, as reported, is not merely procedural but apparently deeply ideological. It is apparently rooted in a “long-standing rivalry” between Rama Sithanen and Manou Bheenick dating back to 2005-2010 when Sithanen was Finance Minister and Bheenick was BOM Governor. The dispute is framed as a clash between fundamentally opposed economic philosophies: Bheenick’s Keynesianism versus Sithanen’s neo-liberalism.

The ideological divergence itself presents a profound challenge. A central bank governor’s control over monetary policy parameters — such as interest rates, exchange rates, and credit allocation — can conflict with the Finance Minister’s economic goals. When strong personalities, each possessing distinct economic visions, occupy the central bank’s highest office and the Finance portfolio, the delicate balance of economic policy is easily disrupted.

The Cost of Conflict

The manner in which this conflict has been handled further undermines the BOM’s credibility. The ongoing blockade of the SBM appointment allows ideological clashes to override institutional necessity, ultimately damaging the credibility of the entire financial sector. It demonstrates a worrying lack of institutional maturity.

The SBM, a vital player in the financial system, needs a functional board to regain public confidence. The government’s failure to swiftly resolve this matter — allowing it to “fester” for weeks — damages its image and its proclaimed determination to “set the house in order.”

On the other hand, the BOM’s continued credibility in the decades ahead depends on its ability to maintain the “solid reputation of no-nonsense regulation” that characterized its early decades of operation. Resilience in an ever-changing global environment requires not only technical expertise but unwavering institutional integrity.

The current dispute represents a significant deviation from the sober discipline of the past. The central bank must remain a privileged, objective interlocutor at the policy level. This requires a commitment from the Bank to act within the bounds of reason, respect the constitutional rights of individuals, and ensure that institutional decisions are made through consultation and transparency.

Mauritius’s economic future hinges on a BOM that is perceived as independent, effective, and above the fray of political and personal conflicts. The central bank’s success has been built on trust; allowing internal feuds to dictate the appointment of critical leadership figures severely risks eroding that trust. The focus must return to the BOM’s foundational duties: serving the nation’s sound economic development with unwavering objectivity and discipline.

Mauritius Times ePaper Friday 11 July 2025