Monetary authority?

Keep that gate secure

Beware of trespassers

The National Assembly passed the Royal Monetary Authority Bill yesterday. I did not support the bill. My objections were based on a simple principle: that the proposed legislation gave the government too much influence over the RMA.

True, it’s important for the RMA and the government to work together to achieve our common national objectives. Yes, I expect the RMA’s monetary policies to compliment the government’s fiscal policies as we, collectively, build an economy that we can call robust and vibrant. And yes, the RMA should be accountable to the government.

But, our central bank must also have sufficient autonomy – primarily from undue government influence – to fulfill its overall objective of achieving and maintaining price stability, which is necessary for sustainable economic growth.

The RMA Bill does, in fact, give the central bank autonomy. Section 4 of the Bill says that:

In exercising the powers vested in it by this Act, the Authority shall be an autonomous body. The Authority shall support the general economic policy of the Royal Government as far as it is possible without endangering the ability of the Authority to achieve its tasks and purposes pursuant to this act.

But this autonomy is threatened in other parts of the Bill. To begin with, the Governor of the RMA (who is appointed by the Druk Gyalpo on the recommendation of the Prime Minister) is not the Chairperson of the RMA Board. Instead, the Chairperson is selected from four other members of the Board, all of who are appointed by the Government.

The Board has seven members, including the Governor and two Deputy Governors. Five of these seven members are directly (the four members) or indirectly (the Governor) are appointed by the Government, already creating a natural government bias in the Board.

For good measure, the National Assembly added two new sections to the Bill. Both of them, but especially the second, would give the Government sweeping powers over the RMA.

The new section added under External Reserves and Foreign Exchange Operations reads:

The Authority may, from time to time, prescribe the terms and conditions associated with lending activities of financial institutions towards priority sectors as may be determined by the government from time to time.

And the new section under Relations with the Royal Government reads:

The Royal Government may, from time to time, issue such directives to the Authority as may be necessary after consultation with the Governor, in the public interest. Any directives issued under this Section shall be reported to the Parliament


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