When the brunt of the 2008/09 global economic meltdown weighed heavily on the world, something else happened according to former President of the African Development Bank Group and Chairman of the Directors Donald Kaberuka.
The period also marked the death of a dogma that values the dominance of the free market against the involvement of government in economic activities, which he referred to as the extreme side of neoliberalism.
Speaking in regard to the transformation agenda of the Central Bank’s role in the present economic conditions Kaberuka advanced that it is not about choosing a dogma but rather providing context to the text of existing theories to which he cited that the Central Bank is independent in Law, but it is not independent in Fact. Kaberuka was speaking at the Bank of Botswana 40th anniversary celebrations.
He argued against the premise often adopted which prescribes the idea of a best practice, highlighting thereby that “there’s no best practice, there’s always a better practice.” Kaberuka used the picture of a landscape which includes within it a mountain, an iceberg and a volcano to describe the nature of the environment which the global economy currently operates on. He compared the mountain to the plethora of problems which are easily identifiable but however present the challenge in determining how they can be tackled. In navigating through the problems, risks come to the fore, which he likened to the iceberg suggesting therefore the importance of garnering an understanding of the whole picture of a problem. He described the volcano as consequences that erupt from the problems citing examples of inequality, lack of inclusion and unemployment. Kaberuka pointed out over-caution and expansion of mandate by Central Banks as likely reactions to the emerging economic changes, to which he advised that broadening of mandate should be accompanied by risk mitigation and capacity building. “If you expand mandate, think about the implication of capacities,” to which he warned that overloading the system could make it difficult to focus on the core mandate.
Professor Happy Siphambe, an expert in Labour and Development Economics at the University of Botswana, discussed the issues raised by Kaberuka following his presentation. Siphambe acknowledged the opposite ends within the economy of ‘liberalism’ which on one hand allows the market to determine the economy and on the other hand ‘control’ which regulates the market. He postulated that achieving a balance between the two will set the economy on the right path. He also concurred that it is necessary to build capacity before broadening activities of the Central Bank. He warned however that the Central Bank cannot continue its reactionary approach to economic challenges, “we cannot afford to be playing catch up all the time,” he asserted.
Governor of Zambia, Dr. Denny Kalyalya also contributed to the issues stating that the need to maintain the mandate of the Central Bank is more pronounced today, suggesting that there is need to adopt and strengthen a forward looking monetary system. “We should think of rebuilding stability while we think about what to add to the mandate,” he said.