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Central Bank’s impartiality at risk

NO ONE is surprised by the Cabinet’s June 24 dismissal of Central Bank governor Dr Alvin Hilaire. Nor is the choice of former UNC minister and retired banker Larry Howai as his replacement a total shocker. That makes neither development any less dangerous given the potential erosion of confidence in the bank’s impartiality. The Central Bank is not entirely independent. Under its governing statute, a finance minister may issue written directives to it on policy. In fact, the 2009 Clico collapse and the 2020 covid19 pandemic illustrated the need for synergies between a governor and a cabinet. But a distinction can be drawn between independence and impartiality. A governor must be free to disagree with an executive. To inspire confidence, the post-holder cannot be beholden. The Central Bank is, like the US Federal Reserve, the state’s banker. Its purpose is to issue neutral advice and to do what is in “the best interest of the economic life of Trinidad and Tobago.” The High Court in 2024 affirmed even the bank’s chauffeurs should be non-partisan. “The substantive functions of the CBTT must be insulated from political interference and the independence of the CBTT must be jealously guarded and fiercely defended,” noted Justice Frank Seepersad. Supplied by history is precedent for the appointment of a former politician like Mr Howai. Winston Dookeran was, famously, a NAR minister before becoming governor in 1997 under the PNM. (He even made a reverse journey back to politics, serving from 2010-2012 as PM Persad-Bissessar’s first finance minister, before Mr Howai assumed the same role until 2015). Yet this kind of overlap should be the exception, not the norm. In any event, Mr Dookeran was not associated with the ruling party when he was appointed, as Mr Howai arguably still is. Asked this week about the risk of being perceived as political, the new governor deployed specious reasoning: “The President indicated she appoints on the recommendation of the Prime Minister and the Cabinet, so every governor is appointed in the same way.” But the issue is not the appointment process, but the appointee. Though Mr Howai is eminently qualified to handle economic policy given his background, other questions might arise. The Central Bank regulates the banking sector from which he famously emerged. There is a reason why a person who “has an interest as a shareholder in any financial institution or company registered under the Insurance Act” should not be governor under section 9 of the Central Bank Act. The dismissal of Dr Hilaire invites, on its surface, comparison with the abrupt, and costly, exit of Jwala Rambarran. But the selection of Mr Howai, too, is another unfortunate repeat of history, needlessly distracting from the government’s laudable fiscal goals. The post Central Bank’s impartiality at risk appeared first on Trinidad and Tobago Newsday.