Thursday, July 27, 2017

Central Bank prepares for independence

Central Bank of Myanmar deputy director general U Thein ZawCentral Bank of Myanmar deputy director general U Thein Zaw

Central Bank of Myanmar deputy director general U Thein Zaw (on behalf of Governor U Than Nyein) spoke with The Myanmar Times following the submission of a draft Central Bank Law to the Pyithu Hluttaw by the Minister for Finance and Revenue on January 30.

When do you expect the Central Bank will become independent?

Members of parliament are working to enact the Central Bank Law during this sitting of parliament. After that law [is enacted] we will become autonomous.

What will change in the Central Bank’s abilities?

At the moment one organisation sets both fiscal and monetary policy. But when the Central Bank is made independent these policies will be handled by two bodies that will hold each other in check. The Central Bank will assume responsibility for monetary policy, which will be the main change from the bank’s current functions.

Do you think the bank’s employees are ready to perform the tasks the bank will assume in future?

This is the key question. We have already formed several new departments and brought in more staff to prepare for this. No country can properly develop its economy without significant progress in the banking sector and the government and parliament knows this, which is why the law has been put into parliament. Central banks need to be energetic and quick to act.

Parliament wants to establish an autonomous central bank as soon as possible but we can perform some tasks already using the 1990 law.

Do you think the new central bank law will meet international standards?

I’ve found that different countries have different definitions of what is meant by an autonomous central bank. We can say the strategy is same, but the approach is not always the same.

Myanmar is a member of the International Monetary Fund, and Article IV missions visit every year to determine the state of the economy and our monetary situation. They [IMF officials] meet government officials and private businesspeople and ask for data, which we have to provide. At the end of the mission they issue a set of suggestions for Myanmar.

The IMF sees our data every year and knows the status of the economy. IMF officials have also said the draft law is perfect for establishing an autonomous central bank. We have also taken suggestions [in drafting the law] from the public through state-owned news paper, and the draft has already been submitted to the Attorney General, the government and parliament.

You said the bank had formed new departments while making the draft. What are these?

We formed departments to handle monetary policy affairs and financial markets, and we reformed other departments, such as currency management, financial institutions and supervision, payment and settlement, and internal audits.

The internal audit department is critical for an autonomous central bank and must be independent, although external audits are also important.