Assembly approves more independence for Central Bank |29 April 2009

The amendments to the Central Bank of Seychelles Act 2004 were presented to the assembly in its session yesterday by Minister for Finance Danny Faure.

He said the Central Bank of Seychelles Amendment Bill 2009 is one of three pieces of legislation that form part of the economic reform programme’s structural benchmark. Two other Bills relating to the reform will be presented to the assembly in June.

Mr Faure said the amendment is needed because many changes have taken place in the country and its economy since the introduction of the 2004 Act, which set up an independent Central Bank of Seychelles (CBS).
 
To ensure the economic transformation is complete and efficient, all the necessary policies and procedures should be updated in a harmonious way, he added.

Mr Faure stressed that one of the key elements of the economic reform programme is its monetary policy, which is carried out in an independent way by the Bank.

Mechanisms to put the policy into practice have to be modified and adapted as the economic environment changes, and one of these mechanisms is the CBS Act itself, Mr Faure told the assembly.

After a series of consultations with economic advisers and experts from the International Monetary Fund through its safeguards assessment on the CBS last year, the government agreed that an amendment to modernise the Act was necessary.

Last week the cabinet approved several proposals to amend the 2004 Act in line with recommendations in the safeguards assessment.

Mr Faure said these proposals have been translated into the CBS Amendment Bill, which will allow for Seychelles to have central bank legislation conforming to international standards and best practices.
The aims of the amendment are:

. To reinforce the independence of the CBS. To do so, the Bill will not allow for a person to qualify as a member of the Bank’s board if he or she is a member of the assembly, is in the service of or is employed by a political party, or is employed in the public service except for the office of the attorney-general;

. To reinforce the capital base of the CBS, its general reserve and method of profit distribution to government;

. To set the role of the CBS in intergovernmental and international meetings. This reinforces the fact that it is the CBS that should represent the government in all important forums to do with monetary policy;

. To change the limit on finances that the CBS can give the government, which will no longer be based on a fixed sum but will represent a percentage of the government’s budgetary revenue, in line with international best practices.

The Bill also says that if the CBS is asked to lend the government more money than the limit agreed between itself and the government, an explanation of why the extra funds are necessary should be submitted to the President for his approval. This should be published in the Official Gazette before the CBS considers the request.

To bring in a penalty element and discourage the government from making such a demand, the rate of interest the Bank will charge the government for extra funds will need to be much higher than the rate normally applicable.

Both parties in the assembly welcomed the Bill, and all members voted for it after lengthy debate.