COVID-19 has no doubt brought back to the policymaking table many lingering, once believed to be settled, issues—much more than the 2007 Global Financial Crisis did or any other event in the past several decades. The consequences for economies worldwide—of any size, type and characteristic—has been devastating, Pacific Island Countries (PICs) included.
In times like these, policymakers—governments and central banks—naturally become more prominent as the guiding stars and sources of support and reassurances. As elsewhere, central banks in PICs endeavour to keep the financial sector afloat—often, via extraordinary means, occasionally encompassing the notion of “whatever it takes”. But central banks anywhere in the world—regardless of size, type and resources—can do only so much, knowing very well that the outcomes of their actions may not always be positive. Moral hazards, distortions and bubbles are among some of the undesirable consequences.
As one could imagine, the challenges of central banks in the PICs can be far greater than in many other parts of the world. In addition to resource constraints, PIC central banks have limited monetary policy tools and very weak transmission mechanisms. For various reasons, policymaking grounded in systematic and scientific research is often a challenge. This is where the efforts and mentoring by Griffith University’s South Pacific Centre for Central Banking (SPCCB) provides an effective and pioneering capacity building model. SPCCB has also provided a platform for cooperation and engagement in the region. One of the great benefits of such cooperation and research mentoring is the joint research papers by Griffith University and the central banks. A targeted PhD program is another benefit of this collaboration as it jointly funds up to four suitably qualified, Central Bank supported candidates to enrol in the Doctor of Philosophy program at Griffith University each year. The initiative is the first of its kind in the region and is greatly appreciated by the central bank governors in the region.
There’s a common view in the region that more can be done regarding the capacity building initiative launched and facilitated by SPCCB. And this is where I’d like to share some thoughts. The intention is to initiate a regional discussion and deliberation on an issue that could have long-lasting positive implications.
The SPCCB has the potential to become a “research and policy formulation” capacity building hub for the PIC central banks, much like Kenya School of Monetary Policy Studies (KSMPS). To accomplish that vision and goal, however, a much greater, multi-lateral effort and partnership would be required. SPCCB’s key stakeholders include Asian Development Bank, the World Bank Group/International Financial Cooperation, International Monetary Fund/Pacific Financial Technical Centre, Department of Foreign Affairs and Trade, and central banks of Australia and New Zealand. A collaborative approach among these stakeholders, the central banks and SPCCB would be required.
The collaboration has commenced, with ADB’s sponsorship of the 2020, now 2021 Regional Conference and co-convening of the 2020 Virtual Governors’ Forum. This multi-lateral steppingstone is a welcome start. But, of course, more is possible. As the Governor of the Reserve Bank of Vanuatu in his keynote address at the 2019 Vila Conference indicated:
“we central banks are very keen to formalise partnerships with the key stakeholders. We’ve identified prospective collaborative opportunities as follows: collaborative working papers; research training attachments; conference convening for regional and international engagement; and preparing for PhD via the post graduate diploma phase”.
I anticipate this will provide food for thought and trigger a much-needed discussion and debate regarding central banking functions, obligations and opportunities in the Pacific.
Mr Luke Forau, Governor of the Central Bank of Solomon Islands.