As a banking and monetary referee, central bank cannot be politically involved: Kamati
By Adolf Kaure.
The Principal Economist for modelling and forecasting at the Bank of Namibia, Reinhold Kamati, says that central banks have a mandate to advise the government but not to be politically involved.
Kamati made these remarks at a Bank of Namibia annual ecomomic reporting workshop held in Swakopmund on Tuesday.
“We are mandated to find mechanisms to be the last line of defence, without being involved politically. However we must still advise. You cannot be a referee and play at the same time,” said Kamati.
According to him, there is a misconception that central banks hold too much power, however they are appointed and not elected.
“Namibia is a democratic society which has a free market economic system. The president has a mandate to choose the governor of the central bank and the bank has operational independence, although not absolute, for the best interest of electorate without fear or favour.
“Too much money can be a problem, so we are mandated to control the lending of money by commercial banks so it can be done with prudence.”
“Control the rate at which prices are increasing. This is done through monetary policy announcement every three months. Too much money causes inflation, but it takes time to produce goods. Monetary policy tools such as open market operations, discount window lending and reserve requirements [are employed] to influence the short-term interest rates.”
“Sometimes stability breeds instability. Being too optimistic about the present, [borrowers] prefer to spend to the point where it becomes unstable,” he said.
Kamati further described the bank’s role of having power to remove bank directors of banking institutions that compromise its laws, policies and regulations if moral persuasion fails.
Approximately 10 journalists attended the two-day event, which concluded on Wednesday.
Bank of Namibia, Principal Economist for Modelling and Forecasting, Reinhold Kamati leading his presentation during the bank’s annual economics reporting workshop. (Photograph by Adolf Kaure)