Tito Mboweni slams dismissal of Zambian central banker

The finance minister says his comments have got him into ‘trouble’, but he stands by the statement

23 August 2020 - 19:13 By Linda Ensor
Tito Mboweni.
Tito Mboweni.
Image: Sunday Times/Esa Alexander

SA finance minister Tito Mboweni is sharply critical of the shock dismissal by Zambian President Edgar Lungu of the country’s central bank governor, Denny Kalyalya.

Mboweni, himself a former governor of the Reserve Bank, regards the independence of the central bank as sacrosanct.

SA Reserve Bank governor Lesetja Kganyago has also emphasised the need for an independent central bank, saying recently that countries with independent, inflation-targeting central banks have lower and less volatile inflation.

“The point here is that the independence of the central bank matters, with the experience of other emerging and developing economies bearing testimony to this,” said Kganyago​

On Saturday Mboweni took to Twitter to say that “presidents in Africa must stop this nonsense of waking up in the morning and fire a central bank governor. You cannot do that. This is not some fiefdoms of yours! Your personal property?! No!

“That governor was a good fella. Why do we do these things as Africans. The president of Zambia must give us the reasons why he dismissed the governor or else hell is on his way. I will mobilise!!”

Then on Sunday Mboweni wrote without providing any explanation: “Looks like I am in trouble about my statement on the dismissal of the Bank of Zambia governor. I stand by my statement. Central bank independence is key. Not negotiable. Let all central bankers speak out!”

Lungu replaced Kalyalya with former deputy finance minister Christopher Mphanza Mvunga, who takes over as inflation hovers at about 16%, the economy is set to contract 4.2% this year and the currency has depreciated 26% against the dollar in 2020, Bloomberg reports.

Kalyalya, seen by investors as a credible governor, had repeatedly called on the government to cut the fiscal deficit amid ballooning debt and falling foreign exchange reserves.

Bloomberg quoted Lusaka-based economist Trevor Simumba as saying that Mvunga was not capable of being a central bank governor. He praised the performance of Kalyalya.

A statement from State House said: “President Lungu has terminated the contract of Bank of Zambia governor Dr Denny Kalyalya with immediate effect,” without providing any reasons for the dismissal.

Reuters reported that Kalyalya, who previously served as a World Bank executive director, was appointed in February 2015 and had his contract extended in 2018 until 2023. His dismissal comes barely three days after the central bank cut its benchmark lending rate by 125 basis points to 8% to try to safeguard financial sector stability and protect livelihoods in the wake of the Covid-19 pandemic.

The appointment of Mvunga, who was serving as deputy secretary to the cabinet in the finance and economic development unit, is subject to ratification by parliament, the president’s statement added.

Mvunga, seen by political analysts as an ally and close friend of the president, worked as a senior auditor at Deloitte & Touche from 1988 to 1993 before joining the banking sector. He worked at Standard Chartered bank until 2015, when he was nominated as an MP and appointed for a brief stint as deputy finance minister until 2016.

-BusinessLIVE with Reuters and Bloomberg