The provisions of legislation governing the BOM are clear. Under no circumstances should the reserves of BOM be used to finance vote-catching schemes. Unfortunately, some stoop to please their political Masters even if they have to bend backwards. There is a hefty price to pay when errand boys are appointed to head institutions which should be fiercely independent.
The BOM cannot dance to the tune of any piper however heavy-handed the latter is. Macroeconomic policies have to be sound and it is the responsibility of the Monetary Policy Committee to fulfil its mandate. There is an absolute necessity for clarity, certainty on Inflation, interest rates and of the impact on GDP. These macroeconomic indicators will be measured and quantified. The consumers, the buyers and sellers, the investors, the tourists want predictability and reliability, ie Parity in exchange rate and a targeted inflation.
Role of BOM
It is the supervisory body of the banking sector. Banking licenses are issued under strict provisions and it will call upon any bank to undergo stress tests as required.
But what happen when the demarcation line between Government House and BOM becomes blurred?
When a Government does not have a culture of restraint, goes on a spending spree as if there is no tomorrow?
In a democratic country the Governor of the Bank would convey the signals to impress upon Government to exercise restraint. Expenditures have to be controlled. As matters stand loose fiscal policies and an overvalued rupee are already recipes for disaster.
The Resignation of Governor of RBI
In India, following the resignation of the Governor of the Reserve Bank of India, Urjit Patel, his Deputy warned that governments which make « inroads into central banking apparatus and decisions » could incur the « wrath of the markets ».
His predecessor Raghuram Rajan also stated that the RBI governor’s resignation should be seen as a « note of protest ». He made it clear that the « extreme change » through which the RBI board was being given more operational authority « violates the principle of how the RBI used to operate and should operate. » In other words Government should not interfere.
Unfortunately in Mauritius we don’t have the likes of Urjit Patel or Raghuram Rajan at BOM.
The Economic Intelligence Unit has forewarned us that we cannot forever live on borrowed time and borrowed money.
Is the PM contemplating using part of the reserves of Bank of Mauritius to rig the Electoral process?
According to an anchor Journalist of NDTV “now in its last few months, the Modi regime appeared to be eyeing a nice chunk of the RBI’s reserves to spend on vote-gathering schemes.”
Be it in India, Mauritius or any part of the world very few people give a damn about technical issues of central bank reserves and capital adequacy ratios of commercial banks. It is not because we live only once that we should leave it to the next generation to bail out the country. We are not India which has a vast internal market. Even India cannot give up on Global Economic Integration.
India, on the threshold of a General Election, can temporarily afford to give up on Global Economic Integration but for a SIDS like Mauritius only fools can ride the wave of populism politics.
The process of Electoral rigging has started and is gaining momentum and I hope not with the complicity of the BOM. At the end of the day we are all accountable.