Central Bank accountability and the importance of explaining its actions: Case of Mauritius

Central bankers are often cribbing about lack of independence but seldom mention whether they are accountable enough.

Yandraduth Googoolye, Governor of the Bank of Mauritius in this speech talks about accountability. More importantly, says criticism from media is welcome:

We have come a long way from the days when central banks were considered as mysterious institutions, shrouded in secrecy, and markets left guessing on what the policies could actually be. In 1981, Karl Brunner, a famous monetary economist, said, “Central Banking thrives on a pervasive impression that it is an esoteric art. Access to this art and its proper execution is confined to the initiated elite, while its esoteric nature [is] revealed by an inherent impossibility to articulate its insights in explicit and intelligible words and sentences.”

Since then, the veil on the mystique of central banks has been lifted and it is very well recognized both in academia and in central banking circles that central banks have to become more accountable. Accountability requires increased transparency and effective communication. But this brings its own challenges of how to communicate and how much to communicate.  

It is imperative for not only stakeholders, but also the public, to fully understand what the central bank is trying to do and the impact of its actions on the future course of the economy.  Nothing can undermine independence more quickly than being opaque and unaccountable!

Over the years, the Bank has been producing and disseminating more detailed financial accounts. We are in discussions with our external auditors to see how much more transparent we can be in publishing the accounts, while at the same time not compromising the requirements of international financial reporting standards.

Communication is not just about our interaction with markets. We have deemed it appropriate to communicate with different stakeholder groups in the broader civil society through our financial literacy programme.  We regularly meet business associations from different sectors of the economy. We find it useful not only to express our own views but also to hear the views of market participants. It is important for us to know what the thinking about the Bank and our policies are. Although we may not be always successful in changing perceptions and misconceptions about the Bank and its policy, we have found that these interactions and initiatives have helped to create a greater appreciation of the challenges we face.

A more candid relationship between the Bank and the media will accompany us in our mission. It does not mean that the media should be our porte-parole nor report uncritically on our actions. This has more value to the central bank than an uncritical media. Media is perceived as a source of objective and independent information and analysis and whatever is reported in the local press has an international coverage, which could affect the credibility and image of the jurisdiction. Even my predecessors have reiterated on this point in their previous addresses.

Interesting to see a small economy central bank encourage criticism…

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