MBABANE – Should the Central Bank of Eswatini (CBE) be subjected to an examination of its financial records by the Office of the Auditor General just like other State-owned enterprises (SOEs)?
Perhaps this question is set to be answered since it appears that Members of Parliament (MPs) are determined to see the CBE being audited by the Office of the AG.
Having made their intention known just a few weeks ago, the MPs will now move a motion.
This is reflected in today’s House of Assembly Order Paper issued by the Office of the Speaker, Jabulani Mabuza.
According to the Order Paper, the MPs will move that the minister for Finance should table before the House, within six months of adoption of the motion, a draft amendment of the Central Bank of Eswatini Order, 1974, to enable the Office of the Auditor General to audit the CBE.
The minister, according to the motion, will also be called to submit a comprehensive report with recommendations on strengthening the legal framework on the audit of the CBE, and on balancing the bank’s operational independence with constitutional accountability.
Also, the minister will be called upon to advise the House whether the current arrangement, which excludes the Office of the AG, is consistent with International Monetory Fund (IMF) and World Bank best practices on the audit of central banks.
The motion will be moved by Khubuta MP, Masiphula Mamba who will be seconded by Mbabane East MP, Welcome Dlamini.
Notably, the CBE was recently taken to court by the Eswatini Consumer Forum (ECOF) over the construction of its headquarters.
ECOF argued that the construction of the headquarters was financed through public funds.
However, the CBE, through its legal team, disputed this.
In its affidavit, the bank argued that its financial independence is protected by the Constitution, which guarantees it institutional autonomy over its operations and financial management.
Section 206(1) of the 2005 Constitution formally establishes the CBE, specifying that it consists of a governor, necessary staff and powers determined by Parliament.
Section 206(5) explicitly provides for the operational independence of the bank. Although the Government of Eswatini wholly owns the institution, this legal autonomy enables the bank to make objective monetary and financial decisions.
The bank acts as an advisor to the government on financial and economic matters, manages foreign reserves and fosters a stable financial system without being driven by profit.
According to research, the IMF advises that a Central Bank must have an independent external audit conducted according to recognised international auditing standards.
Depending on a country’s legal framework, external audit can be performed by a private/international audit firm or by the country’s Supreme Audit Institution (SAI), such as the auditor general.
According to the research, the IMF’s safeguards framework requires central banks, particularly those of countries using IMF resources, to have adequate governance, controls, financial reporting and auditing arrangements.
A cornerstone is that central-bank financial statements are independently audited by external auditors in accordance with international standards.
Importantly, an IMF publication specifically states:
The IMF’s earlier safeguards framework also explicitly recognised Supreme Audit Institutions as one possible form of external auditor for central banks.
In terms of examples, the research reflects that the IMF has previously identified Ghana as one of the countries where the auditor general is used to audit the central bank.
Meanwhile, this will not be the first time that MPs made a demand towards the operations of the CBE.
In 2020, MPs vowed to pay close scrutiny to the relationship that exists between government and the CBE.
At the time, it was seasoned legislator and Lobamba Lomdzala MP, Marwick Khumalo, who said the marriage between government and the CBE was ‘somewhat unholy’, in as far the granting of loans was concerned.
The MP said the Minister for Finance, Neal Rijkenberg, should read Section 204 of the country’s Constitution, especially Subsection (6), to determine whether this relationship was adhering to procedure. .
Section 204 of the Constitution speaks to the ‘power to borrow or lend’, and subsection (6) describes the word ‘loan’ as including ‘any money lent or given to or by the government on condition of return or repayment and any other form of borrowing or lending in respect of which; (a) money from the Consolidated Fund or any other public fund may be used for payment or repayment; or (b) moneys from any fund by whatever name called, established for the purpose of payment or repayment whether in whole or in part and whether directly or indirectly, may be used for payment or repayment’.
In response, Minister Rijkenberg said he was very much aware of what the Constitution says with regard to the relationship between government and the CBE.
At the time, the IMF had continuously warned the CBE to refrain from providing further budget financing to government.
According to the Order, the CBE may, on such terms and conditions as the Board may from time to time prescribe, grant temporary advances to government and to statutory organisation which maintain accounts with the bank.
The repayment period is within six months following the end of the financial year of the bank in which they were granted, at such rates of interest and upon such security as the Board may determine.
In the event the loan is not repaid within the specified period, such advance shall be taken into account when determining the maximum advances that may be made the following year.
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