The IMF has urged the SA Reserve Bank to say more about the dissenting votes within the monetary policy committee (MPC) on interest rate decisions.
It also wants the Bank to provide more clarity on who is responsible for any changes to the inflation target, saying more transparency would be good for monetary policy.
But the IMF has found that the Bank “sets a high benchmark for transparency and is considered by external stakeholders one of the most reputable and effective public institutions in SA and globally”, it said in a detailed report late last year on the transparency of the central bank.
The Bank’s transparency practices in areas such as monetary and macroprudential policies, exchange control and human capital “could serve as a role model for other central banks”, the IMF said.
Its report followed a comprehensive review by an expert panel which the Bank itself requested to ensure it continued to set high standards for transparency and find further improvements.
The IMF has conducted similar reviews for other central banks around the world in recent years, benchmarking them against its central bank transparency code.
As central banks have become more independent, transparency has become crucial to ensure they are accountable to the public, and when it comes to monetary policy specifically, transparent communication tends to ensure more effective implementation.
The IMF report comes as the Bank and the Treasury are gearing up to review SA’s inflation target. Governor Lesetja Kganyago has been pushing for the target range to be lowered, possibly to a point target of 3%, to entrench price stability and make SA more competitive with its peers.
The report suggested that the Bank needed to clarify the process of reviewing the monetary policy framework and the respective responsibilities of the National Treasury and Bank to avoid uncertainty, making it clear that the target is set by the Treasury in consultation with the Bank.
The IMF also weighed in on the contentious issue of whether the MPC should disclose more about how members voted: the Bank has long resisted doing so, disclosing a breakdown of members’ “preferences” after each MPC meeting but not detailing why.
The IMF report gives the Bank credit for increasing the transparency and accountability of its monetary policy framework over time and for publishing a wealth of information as well as communicating to parliament and other stakeholders.
But it calls for the Bank to “provide more information on dissenting votes in MPC deliberations”, noting while the committee works on consensus, split votes regularly occur and “no explanation for the dissenting votes is provided in the monetary policy statement”.
External stakeholders often cited this as a gap, said the IMF. It called too for the Bank to publish alternative risk scenarios — not just its central projection.
In its own response — published as part of the IMF report — the Bank countered that its MPC statement aimed to capture the different views, and while it agreed it could provide more details, “the SARB considers the current practice of disclosing the preferences of MPC members appropriate,” it said.
The MPC’s first statement of 2025 is due on January 30.
Independence
The IMF also recommended that the Bank provide the public with clearer explanations of its independence, and that of its officials, including how this is protected by the constitution and other legislation. It found that the Bank’s governance arrangements were broadly strong.
“The recent extension of the governor’s and one of the deputy governor’s terms for another five years, as well as the appointment of a new deputy governor, eliminated the risk of a power vacuum at the Bank and was perceived positively by the markets,” said the IMF, which also noted that strong safeguards were in place in areas such as governance, audit and financial reporting.
It said, however, that there was scope to enhance the transparency of the Bank’s management of SA’s foreign reserves by disclosing non market-sensitive aspects of its investment guidelines for the reserves.
It called particularly for more information to be shared with markets and the public on the Gold and Foreign Exchange Contingency Reserve Account, to allay concerns among some stakeholders about the Bank’s financial autonomy.
This arose last year when as part of the February budget the Treasury and the Bank agreed to distribute R250bn of R500bn of unrealised profits on SA’s gold and foreign exchange reserves to help to reduce government borrowing and strengthen the Bank’s balance sheet. This was a first, and the Treasury and the Bank put a detailed framework in place to govern the series of transactions required.
The IMF’s report calls for more transparent communication around the framework for this, though its review was conducted before details of the framework and timelines were published, and before the Bank implemented the first tranche of the transfer, which it completed successfully last year.
“The SARB clearly recognises the importance of reaching different audiences and promoting awareness of its mandate, policies and actions,” said the report, though it recommended that the Bank’s communication arm could adopt a more holistic and proactive approach.
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