Year of financial consolidation Results of macroeconomic financial consolidation Prospects for 1998 1. The debate on the independence of central banks is, fortunately for both governors of central banks and Ministers of Finance, gradually losing its momentum. The discussions were often misguided and created the misleading impression that central bankers had a desire to be completely isolated from their political masters, and that monetary policy objectives could and should be pursued in complete isolation from fiscal and other macroeconomic policies. This is, of course, not realistic.
Monetary policy is but part of the overall macroeconomic strategy pursued by governments.
Monetary policy must, after all, support the overall macroeconomic goals of governments, and must be applied in a consistent framework of overall macroeconomic strategy. The independence of the central bank therefore applies not to the setting of the final destination, but to the choice of the route it prefers to take to reach that predetermined destination. In the context of the South African macroeconomic policy framework, Government has decided, by means of the Constitution of the Republic of South Africa, that the task of the South African Reserve Bank shall be to protect the value of the currency. The pursuance of this objective, however, often requires unpopular measures that politicians may find difficult to force on their voters, particularly in times of pending elections. For this reason, and to ensure consistent and persistent implementation of the required financial disciplines, central banks are given independent discretionary powers on the operational procedures they regard as necessary to discharge of their responsibilities.