How The CBN Can End Current Economic Crisis – IMF

The International Monetary Fund (IMF) says it is available to help economies in sub-Saharan Africa at any time it is called upon.

Mitsuhiro Furusawa, IMF deputy managing director, disclosed this on Tuesday, saying central banks in the region had been facing some challenges that could do with some help from IMF.

The IMF then highlighted certain steps to be taken to ensure that Central Banks’ policies improve the economic fortunes of their respective countries.

“First, the central bank should have a clear legal mandate of policy goals and operational independence to pursue these goals,” he said.

“Second, the primary, medium-term objective of monetary policy should be price stability. Monetary policy ultimately has a limited capability to directly influence real variables such as output growth over the long-term.

“Third, the central bank should make a medium-term numerical inflation objective the cornerstone for its monetary policy actions and communications. A transparent inflation objective provides a simple benchmark against which to measure performance.

“Fourth, the central bank should carefully take into account the implications of monetary policy adjustments for financial stability. However, this should not come at the expense of undermining the central role of the medium-term inflation objective. Any significant erosion of central bank credibility can change inflationary expectations for the worse. This, in turn, could have an undesirable impact on real activity and financial stability.

“Fifth, the central bank should have a clear and effective operational framework, by setting an operating target and clearly communicating the link between such an operating target and the medium-term inflation objective.  This supports the functioning of money markets.

“Sixth, the central bank should have a transparent, forward-looking monetary policy strategy that reflects timely and comprehensive assessments of the monetary transmission mechanism.

“Seventh, central bank communications should be transparent and timely. This helps reduce uncertainty, improves monetary policy transmission, and facilitates accountability. The goal must be to build credibility.”