In his Medium-Term Budget Policy Statement Minister Tito Mboweni reaffirmed the independence of the Reserve Bank and reiterated its central role of keeping inflation under control.
Mboweni cited the Constitution which states: “The South African Reserve Bank, in pursuit of its primary object, must perform its functions independently and without fear, favour or prejudice, but there must be regular consultation between the Bank and the Cabinet member responsible for national financial matters.”
He further referred to the 10th Governor of the Reserve Bank, Lesetja Kganyago, as among those who “have been resolute pillars of support” of National Treasury.
Mboweni’s statements are at odds with recent attacks on both the ownership structure of the Reserve Bank and its core mandate to keep inflation rate within a narrow band.
Those questioning the role of the Reserve Bank have often sought to make it more amenable to political pressure and, by implication, open to short term political objectives.
However such amenability would undermine what Mboweni referred to as the “two macroeconomic precondition of growth: a sustainable fiscal position and low and stable inflation”.
Despite these attacks Mboweni expressed confidence that the Reserve Bank will keep inflation under control and reaffirmed, in the face of the current criticism, the need for it to be independent.
The envisage role of the Reserve Bank has to be read together with Treasury’s commitment to “stabilising and bringing down the debt-to-GDP ratio”.
In the absence of such a commitment, the role of the Reserve Bank in maintaining inflation targets is fundamentally undermined.
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