The dismissal of the Governor of the Bank of Jamaica (BOJ) last week Friday provides the government with an excellent opportunity to review the current operations of the central bank in keeping with its mandate and functions.

It should be timed with the broader reform plan for the public sector outlined in a ministry paper entitled 'Strategy for Restructuring the Public Sector' tabled in the House of Representatives Tuesday by Prime Minister Bruce Golding.

"The current national and global imperatives have impelled the Government of Jamaica to accelerate the modernisation and restructuring of the public sector to become leaner, more efficient, flexible, responsive, and accountable," said the ministry paper.

"The rationalisation of the public sector will demand a radical restructuring of established organisations and systems, including a review of their mandates and related objectives, introduction of incentives, development of an accountability framework, decentralisation of authority, and rationalisation of the organisational culture."

Operations review

In that context, Government should appoint a committee comprised of eminent local and regional central bank experts to review the operations of the BOJ, covering at a minimum, the following:

1. The current open market operations of the BOJ and movement of interest rates in keeping with the overall mandate and functions of the BOJ;

2. The supervisory functions of the BOJ and whether the relationship between the BOJ, the Financial Services Commission and the Jamaica Deposit Insurance Corporation needs to be changed and/or strengthened;

3. Whether the governor of the BOJ should continue to operate as the executive chairman of the board of directors of the bank and the role of the independent and executive members of the board of the BOJ; and

4. Whether the governor of the BOJ should be required to face the Standing Finance Committee of the House of Representatives twice per year to report on monetary policy during the year under review, the targets set for inflation, interest rates, stability in the foreign exchange market, etc, the extent to which these targets were achieved, and the impact of actions taken by the bank during the preceding and current year on the productive sectors and the fiscal budget.

Clearly, the Cabinet will also have to conduct a review of executive compensation at the Bank of Jamaica and other public sector entities, with particular attention being paid to the levels of executive compensation in relation to compensation of the judiciary and the political directorate.

Golding has said a review will be done for executives earning $10 million or more.

Fringe benefits

Particular attention needs to be paid to 'fringe benefits' and whether all of the non-taxable and other allowances and special mortgage facilities, currently provided to selected technocrats, should not all be included in an individual's taxable salary and require all public sector employees to purchase their own vehicles, pay for their own housing, etc.

In terms of the relativity of salaries at the BOJ, Financial Services Commission, the Development Bank of Jamaica, and Ex-Im Bank to the salary scales in the local financial sector, it is important to consider the symbiotic relationship between the government's insatiable appetite for loans, the high interest rate regime and the exorbitant spreads, huge profit margins and resultant large salary packages in the sector.

Given the drastic cuts that will have to be made in government expenditure over the next few years as the Government attempts to reduce the public debt and reduce overall interest rates, it is time to bring compensation packages in line with what the country can afford to pay and let the chips fall where they may.

renee.shirley@gleanerjm.com