[By Maka Tounkara]
The sudden dismissal of Bank of Zambia Governor Denny Kalyalya was as surprising as the choice of his successor Christopher M. Mvunga. Both developments sent shock waves throughout the country. A trained economist by specialisation, Kalyalya was appointed head of the central bank by President Edgar Lungu on 13 February 2015. He took over from Michael Gondwe, a lawyer. Following the appointment of Kalyalya, the president received kudos from members of business and finance communities because the choice inspired confidence in the banking sector. The same cannot be said about the response that has accompanied Mvunga’s appointment. While I congratulate Mvunga on his new role, I am not persuaded that he is the right nominee to improve Zambia’s monetary landscape and help steer the economy away from the brink of a recession.
Many people have condemned the appointment of Mvunga as the new Bank of Zambia governor on ground that he is a mere accountant. These views are misplaced, as the constitution provides that a prospective candidate to the position of Governor must, among other requirements, have specialised training and experience in economics, law, accountancy or related field. Mvunga, a trained accountant, theoretically qualifies to be Bank of Zambia Governor owing to the fact that he is a citizen and has specialised training in accounting as prescribed under the law. In my view, the concerns should be around the suitability of Mvunga for the role: is he a person of proven integrity? Does he have the relevant experience to occupy the top job at the central bank? Is he a credible and competent figure who can inspire confidence in the market and keep Zambia’s economy on an even kneel? NO, would be my answer to all these questions because I do not think he was the best candidate for the job. It is not enough to possess minimum qualifications for such an important position as central bank governor. One must have extensive and relevant experience at the highest level and intimate understanding and knowledge of financial matters. Otherwise, any person with training in law, economics or accountancy, with bits of experience in financial institutions, would be eligible to be appointed to the role.
The professional background of the central bank governor is instrumental in shaping and determining the course of Zambia’s monetary policy. This is because the primary role of the Bank of Zambia is overseeing a sound monetary system and policy, which is at the core of Zambia’s economic development agenda. The credibility of the head of the central bank boosted by relevant past professional experience in central banking is key in devising sound monetary policy that encourages growth. In times of economic turmoil and distress, it is important to appoint a central bank governor who inspires confidence. This was demonstrated by President Lungu in his congratulatory letter to Kalyalya when he appointed him as Bank of Zambia Governor: “Your experience and knowledge in the sphere of economics should stand you in good stead to help our country at a time when we face enormous challenges largely on account of external factors.” Can such sentiments be echoed about Mvunga? The answer is no. It is evident that Kalyalya brought a wealth of economic experience in monetary policy having once served as deputy governor of the Bank of Zambia. Many economic commentators welcomed this appointment because Kalyalya was seen as a technocrat who inspired confidence in the banking sector.
The credentials and experience of the new Bank of Zambia Governor as an accountant are impressive. However, there is nothing in his background that makes him suitable or inspires confidence in the conduct of monetary policy. Moreover, the credibility of Mvunga is highly questionable owing to the fact that he is a full-time Patriotic Front (PF) member who once served as an appointed deputy minister. His transfer from Cabinet Office to Bank of Zambia is viewed by many as state capture of the Central Bank, a move that is likely to politicise the operations of the central bank.
The conduct of modern-day monetary policy heavily depends on the credentials of the central bank governor, and their importance manifests in many ways. Take India circa 2013 as a case in point. The country was faced with spells of volatility in the financial market due to external forces beyond its control. The appointment of Raghuram Rajan in 2013, a former Chief Economist and Director of Research at the International Monetary Fund as the Governor of the Reserve Bank of India is responsible and credited with restoring financial stability. Similarly, Paul Volcker’s credibility and professional experience at the US Treasury Department is famously responsible for the decline in inflation in the 1980s. It is apparent from the foregoing that the appointment of a governor with relevant experience is key not only to the conduct of monetary policy but also to the restoration of financial stability and enhancement of credibility in the management of monetary policy.
Central banking operations should be spearheaded by apolitical and truthful technocrats whose allegiance is to the nation and not the party in power. It is imperative that the central bank is devoid of individuals who are perceived as serving the interests of the political elite at the expense of marginalised citizens. This is because the central bank is the custodian of confidence which is essential to calming financial markets.
Although the President has the power to appoint whoever he deems fit to serve as Bank of Zambia Governor, this power should be exercised in the interests of improving monetary policy and subsequently the economic welfare of the citizenry. The appointment of Mvunga as new Bank of Zambia Governor is unlikely to restore financial stability because his experience is at variance with the major requisites of the post. As a country, it is important that we learn from our past mistakes. Many people raised similar concerns when Margaret Mwanakatwe and Michael Gondwe were appointed to the positions of Minister of Finance and Governor of the central bank respectively. Despite being qualified in their respective careers, the two renowned individuals were not suitable for the posts they were appointed to owing to the huge mismatch between their professional qualifications and the relevant experience needed to smoothly execute fiscal and monetary policy.
The president should have hired an individual with a track record similar to that of the outgoing governor in order to inspire confidence in the conduct of monetary policy. It is not too late for him to do so. I call on the President to revoke his nomination of Mvunga and appoint a credible and competent person as Kalyalya’s successor. Mvunga’s experience, while appropriate to other sections of government, is unlikely to boost financial regulation reforms or have a significant weight on how Zambia’s competitiveness and financial firmness is perceived. What the President should have done is to either elevate the current Deputy Governor, Dr Francis Chipimo, to the position of governor, or appoint a new bank governor with unrivalled experience for purposes of bolstering confidence and credibility in the central bank.
The qualifications of the new Bank of Zambia governor will likely not add any value to the conduct of monetary policy. We have to be honest with the President and call a spade a spade. What the central bank requires is a qualified technocrat who will professionally advise the President on the best policy mix that can revive Zambia’s economy. Mvunga’s previous assignment as deputy secretary to cabinet and professional experience as an accountant will neither boost the Bank of Zambia’s image nor bring about best practices of monetary policy. The autonomy of the central bank and credibility is critical to maintaining a sound financial system, and the unfortunate dismissal of an experienced and eminent technocrat with relevant economic experience is a huge blow to the growth of Zambia’s financial and banking sector. Zambia is experiencing economic hardships, and an experienced person with a proven track record in economic research and practice would have been a suitable fit as head of the central bank.
Maka Tounkara is a Lecturer in Economics at the University of Zambia. Educated at Oxford, he researches climate change, fiscal and monetary policy, and structural transformation in low carbon settings.