business

Jan. 19, 2022

NEO SENOKO

3 min read

MPs’ control over central bank imminent

MPs’ control over central bank imminent

The Central Bank of Lesotho

Story highlights

  • NRA says an Act of Parliament shall provide for specific objectives and functions of CBL
  • Proposed clauses include ensuring greater independence and autonomy of the bank

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THE National Reforms Authority (NRA) is pushing for greater independence of the Central Bank of Lesotho (CBL) by including it in the constitution, arguing it will among others inspire international confidence in governance quality of the country.

The NRA said an Act of Parliament should provide for specific objectives, functions, powers and operations of the CBL.

The Chairperson of the NRA’s Economic Sector Reforms Committee, ’Mammako Mohale Lerata said the proposed clauses included ensuring greater independence and autonomy of the bank and freeing it from pressures and interference in the course of carrying out its functions.

“With regard to the Central Bank of Lesotho, the committee recommends anchoring the establishment of CBL in the Constitution so as to meet internationally acceptable standard practices for institutions of its nature”, Mrs Lerata said when tabling the economic report before the NRA.

“Fire wall between the Central Bank and the Ministry of Finance is imperative to enable necessary counter-balancing of fiscal and monetary policies in order to maintain macroeconomic and financial stability in the country.”

According to the committee, a properly constituted and competently managed central bank evokes confidence of the international community, signaling proper macroeconomic and financial management of a country.

It has the effect of strengthening sovereignty, and enhancing requisite dependability of the country globally.  

Mrs Lerata said the development cooperating partners, actual and potential international financial institutions preferred to engage with countries that have independent and autonomous central banks.

She said the International Monetary Fund (IMF), the World Bank Group (WGB), Bank for International Settlements (BIS), the African Development Bank Group (AfDBG) and others, favoured central banks that were competently and efficiently managed with relevant enabling legislation based on international models.

“Both the African Union and SADC are guiding central banks along the same lines in readiness for eventual economic and financial cooperation and union”, Mrs Lerata said. “The CBL has to be accorded that status which is in line with international practices, standards, norms and trends.”

She said the economic committee recommended that the central bank should be a body corporate having perpetual succession, a common seal and capable of suing and being sued in its name and which shall be independent and autonomous and free from influence or interference in the discharge of its mandate.

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“It shall be responsible for formulating, adopting and executing monetary policy, maintaining financial and price stability, issuing of currency, enabling payment, clearing and settlement systems, conducting supervision and regulation of financial and related institutions and activities.

“It shall be the national bank for banks and the government’s bank,” Mrs Lerata said.

Adding: “In carrying out its responsibilities, the CBL shall act independently and without undue influence, fear, favour or prejudice.

“The central bank shall have a board of directors which shall be responsible for the policy and general administration of the affairs and business of the bank.

“The governor shall be the chief executive of the bank, the driver and overseer of the execution of the functions stipulated under scope and powers of the bank.

“Both the governor and the two deputy governors shall be appointed by the King on the advice of the Council of State following recommendation of Parliament.

“Both shall serve a term of five years’ renewable once for a further term not exceeding three years upon good performance.”

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