IMF introduces new transparency code for Nigeria, others

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The executive board of the International Monetary Fund has approved the new IMF Central Bank Transparency code.

It said in a statement on Thursday that the development of the CBT followed on the board’s direction in April 2019 to update the 1999 Monetary and Financial Policies Transparency code, and bring it in line with the recommendations of the 2017 Joint Review of the Standards and codes Initiative.

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It added that the CBT would be applicable, on a voluntary basis, to all IMF members, including less-developed economies.

This indicated the need for risk-based assessments to support policy effectiveness and address macroeconomic risks.

It stated that the accompanying paper outlined the CBT’s five-pillar framework and the proposed application of the CBT.

The IMF also noted that the CBT, its principles and the detailed practices, were developed after extensive consultation with relevant stakeholders.

It stated, “The preparation of the CBT benefited from guidance from a high-level advisory panel, consisting of eminent former central bank governors and academics, and input from an extensive consultation process with central banks and other relevant international organizations.

“These engagements will help ensure that the CBT can provide strong, clear, and detailed guidance to central banks regarding their own transparency.

“The paper also notes the importance of the CBT for policy effectiveness and accountability in light of the wide-ranging policy measures undertaken by central bank in recent years in response to extraordinary shocks, including from the COVID-19 pandemic.”

“These engagements will help ensure that the CBT can provide strong, clear, and detailed guidance to central banks regarding their own transparency.

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“The paper also notes the importance of the CBT for policy effectiveness and accountability in light of the wide-ranging policy measures undertaken by central bank in recent years in response to extraordinary shocks, including from the COVID-19 pandemic.”

The modular, risk-based, and proportional set-up was well-suited to taking into account country-specific circumstances, it added.

It stated that this would also enable the CBT to serve as a tailored diagnostic tool in IMF capacity development and facilitate the voluntary use of the CBT in Financial Sector Assessment Programs and IMF surveillance, such as Article IV consultations, and in an IMF supported program context.

The IMF stated that the directors welcomed the opportunity to consider the staff proposal for the Central Bank Transparency Code and broadly endorsed its general principles.

They noted that the role of central banks–in terms of expanded mandates, unconventional policy actions and complex operations–has evolved considerably in response to the 2008 financial crisis and the COVID-19 pandemic, and agreed that these changes have heightened the need for enhanced transparency.