Advocata Institute organises Monetary Policy Roundtable with CBSL and New Zealand High Commission

Wednesday, 24 August 2022 00:00 - - {{hitsCtrl.values.hits}}

The Advocata Institute recently organised a Monetary Policy Roundtable in conjunction with the Central Bank of Sri Lanka (CBSL) and the New Zealand High Commission.

The event was attended by CBSL Governor Dr. Nandalal Weerasinghe, High Commissioner of New Zealand Michael Appleton, Reserve Bank of New Zealand (RBNZ) former Acting Governor Professor Grant Spencer (joining virtually), Advocata Institute Chairperson Murtaza Jafferjee, CBSL officials, and a number of prominent economists.

The Advocata Roundtable held at the Central Bank commenced with a presentation by Professor Spencer on the monetary reforms that the RBNZ underwent in the 1980s and the lessons that Sri Lanka can learn from them. Between 1984 and 1993, New Zealand’s highly controlled economy underwent significant reforms and restructuring, including monetary and fiscal reform, financial deregulation, labour market deregulation and public sector reform. The monetary policy reforms in particular were undertaken to ensure price stability (low and stable inflation). The reforms included ensuring the independence of the Central Bank (with Treasury oversight but not control) for longer-term monetary stability, which allowed for bold reforms to be taken such as the floating of the New Zealand dollar, inflation-targeting measures, and financial market deregulation.

These reforms helped build out financial and money markets in the nation and occurred simultaneously with fiscal reforms – in particular, to reduce the government’s fiscal deficit – as there was a strong political will to properly sequence and carry out reform. New Zealand now has one of the most open, vibrant and successful economies in the world, which benefits greatly from the efficiency, competitiveness and productivity gains achieved through, wide-ranging reforms in the 1980s and 1990s.

Speaking about the New Zealand experience, Prof. Spencer highlighted the difficulty of ensuring Central Bank independence if the government maintains a large fiscal deficit and the need for clear communication to the public about the need for reforms. He also noted that maintaining stable inflation should take precedence over full employment – as it is the only way to ensure sustainable long-term employment.

The roundtable was live-streamed by the Advocata Institute on Zoom and segments of it will be available on Advocata’s social media pages in the coming days.