Parliament has passed a law granting greater independence to the country’s central bank. The newly amended Bank of Botswana Act has amongst other things brought changes with focus mainly on operational independence of the central bank, proposed cooling off period of the senior management of the bank and governance issues at large.
Finance Minister Peggy Serame explained to the ongoing Parliament session that the review process of the Bill encompassed results of extensive consultations with the International Monitory Fund (IMF) and took into consideration the Southern African Development Community (SADC) Central Bank Model Law and other emerging and anticipated developments.
“The central bank legislation is therefore critical in ensuring issuance and protecting the value of the currency through currency operations, monitory policy, exchange rate management, regulations of relevant financial institutions and sound payments and settlement frameworks,” said Serame.
The Bank of Botswana Amendment Bill which was passed Monday afternoon broadened the functions of the board to include the power to approve the budget of the bank, assess risks and formulate contingency plans for the operations and security of the bank. Key amongst others, the new changes to the law will also see the chairmanship of the Board of the Bank being occupied by an independent member, not the Governor as is the case now. Serame explained that the delinking of the Chairperson of the Board and the Chief Executive of the Bank is proposed as part of the improvement in the governance of the Bank. While the governor has been delinked from the position of the chairperson of the board, the new Act now gives his/her office the power to appoint the staff, agents and correspondents of the bank. It also prescribes a cooling off period for the governor and the deputy governors.
The Cooling off period is a time when former Governor and Deputy Governors of the Central Bank are not allowed to seek employment from a financial payment or credit service provider, whether gainful or not. The new Act has since prescribed the period as 12 months from the date of cessation of service to the bank. It has also set out the remuneration framework to be applicable during the cooling off period.
“This aspect of the legislation is used to mitigate and prevent conflict of interest that may arise in the financial sector,” Serame explained.