Approximately five months after being approved by Parliament, legislation making the Bank of Jamaica (BOJ) independent of the Ministry of Finance is expected to come into effect on April 16.
Minister of Finance and the Public Service Dr Nigel Clarke made the commitment as he opened the debate on the 2021/22 annual Estimates of Expenditure in the House of Representatives last Tuesday.
“I have the pleasure of announcing today that I will be taking steps to bring the Bank of Jamaica Amendment Act into effect on April 16, 2021 and, as of that date, the BOJ will be an independent central bank, accountable to the Parliament,” Dr Clarke said.
“Consistent with our desire for longer economic cycles with longer periods of economic expansion and shorter periods of economic contractions, we are decoupling the monetary policy cycle from the political cycle,” he added.
He said that with price stability being the central bank’s objective now and into the future, and with the bank having the power and independence to pursue that objective with transparency and accountability, households, businesses and investors will make more longer-term decisions and more longer-term commitments.
“This will deepen financial markets, make a wider pool of products available, increase financial inclusion, broaden opportunity and strengthen our economy,” he explained.
He noted that the legislation benefited from and was strengthened by the deliberations of a joint select committee of both Houses of Parliament, consisting of Government and Opposition members.
“We met on weekends, as required, with some ‘stunting’ drama on at least one occasion, but we got the job done. I would like to again thank and recognise the contribution of the members of the joint select committee,” he said.
Highlights of the Bill include as explained by the minister were:
• Full-fledged inflation targeting will be the clear mandate of the central bank. Given our torturous history of high, runaway inflation, we have empowered a well-resourced institution to keep inflation low, stable, and predictable.
• The Act strengthens the capitalisation, governance, transparency and accountability of the central bank.
• Anticipating passage of the Act, we injected $20 billion of permanent capital into the central bank in 2018 which allows the Bank of Jamaica to be compliant with the capital standards of the Act.
• This will be the first public institution in Jamaica with staggered board appointments such that the entire board cannot be replaced in a single political administration thereby providing long-term institutional stability.
• Responsibility for monetary policy decisions is devolved to a monetary policy committee that incorporates views of external participants.
• Minutes of the meetings of these decision-makers will be made public in a revolutionary nod to policy transparency. For the first time, the governor will account to the people of Jamaica in the Parliament through regular appearances before the Standing Finance Committee.
• The Government will no longer be able to, on the whim of the minister of finance, borrow money from the central bank through the printing of money.
He said that the minister will now operate transparently in seeking affirmative consent of the House, and only in national emergencies. Critically important, the Act removes the power of the minister of finance to give the central bank directions on monetary policy.
“We are serious about the role and objectives of our central bank, which is one of the institutional guardians of our economic independence,” Clarke said.
“We are giving the central bank a job to do, we are empowering the central bank to get the job done, we are giving them the independence to do so, and providing the framework for parliamentarians to, on behalf of the people, hold them to account on the achievement of these objectives,” Dr Clarke said.