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Why we need a currency board

« The major cause of (high) inflation and exchange rate instability is that the monetary authorities have too much discretion. A discretionary monetary policy is when the central bank through its various methods and tools has the ability to determine money supply in an economy. This, by consequence, includes the power to set interest and exchange rates. By contrast, under a rules-based monetary policy, the relationship between money supply and the exchange rate is determined at the onset, pegged at that rate and has little room to change in the long term. Exchange rate risk has been determined to be the highest risk consideration to investing in Africa than political risk. A currency board is not the panacea to economic ills but it is a necessary first step and the best policy intervention that will start to resolve the currency problems. It achieves stability and predictability. It engenders confidence in the financial system. When a currency board is implemented, the focus becomes production. » [https://www.theindependent.co.zw/2022/07/15/currency-board-curbing-exchange-rate-instability/]

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« A stable currency and low inflation lengthen economic horizons and are conducive to investment and risk taking. As a reward, households and businesses in Mauritius can potentially benefit from up to four times less borrowing costs. A sound monetary policy is a decisive driver in the journey towards a rewarding destination but in no way is it the only driver. Together with a strong commitment to spend taxpayers’ money efficiently, governments must get their priorities right, like planning for food and energy security, before chalking out other policies with a clear-cut strategy of redistribution, inclusion, and opportunity. »



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