The former President of the African Development Bank Dr Donald Kaberuka has said that central banks must be allowed to function independently from the state if their role to ensure price stability is to be realized.
He said this Friday during a panel debate on ‘The role of the central bank in a market oriented economy’, see http://cfmasv.com/wp-includes/class-oembed.php part of a series of activities to celebrate 50 years of Bank of Uganda. The discussion was held at the Office of the President Conference hall.
Kaberuka alluded to the financial crisis that hit Uganda and Ghana in the 1970s which he largely attributed to the political interference in the running of the two central banks. This he said deprived Uganda the opportunity to achieve middle income status early enough.
“The role of the state turned into a ‘rent seeking’ one which led to macro instability that lasted for a decade and a half. An effective central bank depends on what the government considers as its fundamentals.”
He challenged Governors of Central banks in the East African region to be more pragmatic rather than limiting their mandate to ideology and monetary stability. In his view, visit this http://d4462130.u92.platformpublishing.com.au/wp-content/plugins/events-manager/templates/templates/events-calendar.php Central banks should act according to the evens of the day.
“Development banks should be managed on a private sector basis that responds to market failures but not to be swung around by politics. The development banks we had in 1970s caused fiscal problems. The model must change.”
Dr Adam Elhiraika of the United Nations Economic Commission for Africa (UNECA) who was part of the panel said most African countries wasted the last three decades importing economic models that did not suit their economies.
“Central banks need to broaden their policy frameworks. Some of these banks are sitting on reserves instead of supporting development finance institutions and investments.”
Bank of Uganda Deputy Governor Louis Kasekende however noted that Uganda’s biggest challenge is unemployment and poverty which he said the Central bank has capacity to address if there was an effective model of communication. On infrastructural financing, he advised government that it is placed under macroeconomic frame work.