- Finance Minister says government working on FX proposal
- Says proposal won’t come in near future, needs to be reworked
Sweden’s government should appoint a parliamentary panel to review the central bank’s mandate, according to a preliminary draft recommendation.
The parliament’s Finance Committee also urged the government to present a proposal to the legislature based on a 2013 review led by professor Harry Flam that recommends limiting foreign currency reserves, according to a draft obtained by Bloomberg. The report will be finalized and agreed on at a meeting on Thursday and published the following day.
The committee said the Riksbank’s ability to request money from the state needs to be clarified and, pending the new rules, any build-up in reserves “should only happen if there are exceptional reasons and taking into account the state’s other borrowing needs.”
Flam recommended that the currency reserves be reduced to 125 billion kronor ($15 billion), or 200 billion kronor in exceptional circumstances. Reserves currently exceed 400 billion kronor.
The government is working on a proposal based on the Flam review and it’s a “very good decision” to keep the issue out of the new review, because that would delay it for many years, Finance Minister Magdalena Andersson told reporters in parliament on Thursday. Still, there are parts of the proposal that need to be reworked so “it’s not something that we can present in the near future,” Andersson said.
Swedish lawmakers are initiating a review of the central bank’s mandate and currency reserves as monetary policy tests uncharted territory. The bank has cut rates well below zero and unleashed a bond buying program to pump money into the economy and revive inflation.
A review of its policies from 2010 to 2015, led by former Bank of England Governor Mervyn King, earlier this year recommended giving parliament the power to define the inflation target and making it clearer that only the government can decide on what currency regime is in place.
The committee said a review should address monetary policy objectives, the bank’s responsibility for financial stability as well as its organization and role in the IMF context. Any proposals with constitutional ramifications should be presented before the parliamentary election in 2018, it said.
The Riksbank’s work with interest rate paths and economic forecasting will also need evaluation while exploring a dual mandate should be part of the review, it said.