News This Issue:

• Afghani Issues New Lease Of Life
• The Tide Turns Against CANI
• Turkmen Central Bank Under A Tyrant's Rule
• Modest Macfarlane
• Repse For Prime Minister?
• Rogoff Answers Back
• Staying Out Of The Limelight
• Bank Indonesia Reacts To Bali Incident

Afghani Issues New Lease Of Life
Amid efforts to breathe life back into Afghanistan's skeletal economy, the central bank has now properly taken centre stage. The governor, Anwar al-Haq Ahadi, has been working round the clock to ensure the smooth introduction of the country's new currency, the afghani, which hit the bazaars on 7 October. This now makes Da Afghanistan Bank a fully operational central bank, a role denied it for a decade. Currency issue had previously been controlled by the various warlords, who seemed to have little regard for the hyperinflationary consequences of their actions.

In order to resuscitate the economy, Ahadi has decided to trim a few noughts off the value of the old currency. He says the redenomination "is very important because unless we know how much money is in circulation, it would be difficult to conduct meaningful monetary policy."

Grateful Afghans will now be able to rid themselves of 1,000 shabby old afghanis in return for just one crisp new afghani, printed by the German firm, Giesecke & Devrient 40 to 45 of them buy one dollar. It will take until December to purge the country of the battered and unwieldy old currency, trading at around 46,000 to the dollar when it was laid to rest, which people had got used to carting around in titanic quantities for even relatively minor transactions. Ahadi said, "We want to remove that inconvenience from economic interaction." Some 1,800 tonnes of old afghanis will be burned or recycled.

One slight difficulty is that there are a number of other types of notes in circulation, and, bewilderingly for foreigners, as many as three separate currencies. Warring factions printed various different series of banknotes, and by no means all of these notes are registered at the central bank. Worse still, they have been printed repeatedly with the same serial number, so there is really no way of knowing how many of the old notes are in circulation, although estimates are in the region of 15 trillion afghanis - which are being replaced with around 27 billion new ones.

The country is awash with bogus banknotes, and the central bank has been obliged to accept wholesale one type, the junbishi currency, which predominates in the north, and is worth half the value of the old afghani. As a large swathe of the population's wealth is held in these notes, the central bank has no choice but to accept them - as well as certain types of forged notes - if stability is to be maintained, even though this means some of the warlords will be making tidy profits on their old notes. Ahadi says that the operation will be a logistical nightmare, and some $5-6 million will be spent in transporting the new notes by air and road around the country.

President Karzai said the notes are "a very important issue for Afghanistan's honour and national and political unity." This is reflected in the design of the notes, which depict Afghanistan's architectural jewels rather than personalities which may cause rifts in the people.

The Tide Turns Against CANI
After the deputy governor of the Bank of Albania Dhame Pite was locked up over alleged offences in connection with a banknote emission tender - resulting in a loss of $600,000 to the state budget - the crowd now seems to have turned on the governor of the bank. A bevy of parliamentarians are now baying for the blood of Shkelqim Cani, who they are thirsty to see stripped of his governorship. 35 members of the Democratic Party, the Union for Victory and other opposition parties have signed a vote of no confidence in Cani, demanding that the Bank of Albania Supervisory Council jettison him for his supposed involvement in the scandal linked with Pite's arrest.

They argue that he knows - or should know - exactly what is going on in the institution, in particular the position of foreign reserves, and claim that such sums of money would hardly go missing unnoticed. They see Cani's removal as "the most important instrument" for restoring the Bank of Albania's reputation, which has been "stained by low-profile abuse". They claim that Cani is legally responsible for "allowing, tolerating or covering this act", and that "corruption is evident and intolerable".

The reaction of the leader of the ruling Socialist Party to the opposition's demands was lukewarm, believing that "it is the responsibility of independent institutions to decide on this question… first we must hear the Prosecution Office's [position] and then it is up to parliament to decide." The issue will be discussed in a parliamentary session on November 6.

Turkmen Central Bank Under A Tyrant's Rule
The tyrant of Turkmenistan, President Niazov, who has locked up all political opponents other than those who escaped abroad, and who has fired a succession of central bank governors (Ymamdurdy Gandymov being the last) on trumped up and unsubstantiated charges, has now forced the central bank to issue a set of memorial gold and silver coins, devoted to his own "radiant image" and that of his mother. Having banned use of all electronic payments, he this week also wrecked the commercial banking system's ability to carry out international payments by forcing each and every foreign currency payment to be made through the Central Bank of Turkmenistan, which itself is being investigated by the state security apparatus for an alleged illegal electronic transfer of $41.5 million to foreign bank accounts.

The last time any semblance of a reasonable economic programme came out of the country was in 1997-98, when former central bank governor Orazov (now a leader of the political opposition based in Moscow) tried to negotiate an IMF stabilization programme. The IMF's last contact according to its website dates back to 1999. The country has been described by the Wall Street Journal as "by far the worst failure" among the 15 nations that emerged 10 years ago from the breakup of the Soviet Union. And the central bank is inevitably at the mercy of a dictator who regards his entire country as his personal piggy-bank. Hence the frequent sackings of central bankers who are not given any chance to defend themselves or their record.

Modest Macfarlane
Central bankers are hardly famed for their swagger, but Ian MacFarlane is almost endearingly unassuming. Although he received the financial publication Euromoney's award of "central banker of the year" - which, as its name suggests, is very clearly being given to a person - the governor of the Reserve Bank of Australia insists on regarding the award "as very much a recognition of the performance of the Australian economy and of the Reserve Bank, rather than as a personal endorsement," the bank tells me.

MacFarlane shrugs off the praise and instead points to the glowing performance of his country's economy: "If the award is for the performance of the country and for the bank, then I am not surprised… Because the numbers coming out of Australia have been so good for so long that I feel that Australia is due some recognition." Even then, he seems to attribute this to good luck, as Australia was spared the new economy boom whose aftermath America is now suffering. Furthermore, he describes Australia's economy as vigorous: "It wants to get up and grow so you don't have to entice it."

Where did MacFarlane learn such modesty? Raised in Melbourne, he spent six years at the OECD in Paris after graduating in economics, then moving straight to the central bank where it took him 17 years to edge his way up to governor. He admits to enjoying a spot of golf in his spare time, but is as modest about his performance on the fairway as he is at the bank. When asked his handicap he employed evasive tactics: "I think it would be bad if my handicap was very low because it implies that you haven't been working hard enough." But he seems to have worked hard enough on it to appear to be mildly irked by the better fortunes of some of his peers: "They do have a central bank tournament at the BIS annual meeting - and it is always won by an Asian governor."

His term expires next year, and as usual there is whispering in the corridors as to whether he intends to stay on. On the subject he obliquely said, "If you are young enough to do another one you will think about doing another one. So you see it in terms rather than points of time." Does 56 qualify as young enough? He refuses to give anything away: "I haven't committed myself either way and I am still thinking about it."

Repse For Prime Minister?
Einars Repse, who chucked in his job as governor of Latvia's central bank last December to have a go at politics, has struck it lucky. A tender forty, he may now go from Latvia's premier central banker to pole position in politics. His newly-formed party pipped others to the post in the country's hotly-contested recent election, narrowly winning the most seats. Repse's success can perhaps partly be explained by his elevation to household-name status in Latvia after successfully overseeing the replacement of the Soviet rouble with the Latvian lat in the early 1990s.

His New Era party won 26 seats, with the pro-Russian coalition For Human Rights in a United Latvia coming a close second with 24 seats of the 100 available. The only problem is that Repse seems reluctant to form a coalition with either the pro-Russian coalition or the People's Party - with 21 seats - and although talks are currently under way, some doubt his ability to form a lasting coalition. Repse pledged on gaining his victory to take a hard line against corruption. This is one of the major obstacles to Latvia's entry to the EU and Nato, and Repse intends to do something about it: "This is going to be a fight against corruption and criminality and it's going to be honest work... This work is not going to be for the interest of a party but for the nation"

Staying Out Of The Limelight
In Colombia, the Banco de la Republica is caught up in a spat between President Uribe and the opposition Liberal Party, who have got it into their heads that it would be a fine idea to print a little more money (about 2.5% of GDP) to help the country out of its fiscal ailments. Obviously, they are blissfully ignorant of the demise of some of their neighbours. For his part, Uribe thinks this is a silly idea, pointing out that old problems cannot be solved by creating new ones.

The bank would like to come out in support of Uribe, as the law granting it independence in 1991 forbids it from lending money to the government anyway. But as an independent body, the bank is barred from entering into political debate, and tells me it is not taking a public position on this: "The media is looking for a public confrontation between the central bank and a group of politicians, so in these cases it is better to be cautious." Very sensible. Instead the bank prefers to communicate its opinions on such matters in its various publications, in which it is abundantly evident what its view on this would be. "The Bank opposes this kind of idea but doesn't confront directly with politicians. Instead, we are focusing on an education campaign to increase the level of people understanding about the risks of carrying out an irresponsible monetary policy."

Bank Indonesia Reacts To Bali Incident
Following the horrific bombing in Bali, Bank Indonesia was quick off the marks in intervening in the foreign exchange markets to steady the rupiah. Even though Indonesia has a free exchange-rate regime, the bank still monitors closely developments in the domestic foreign exchange market, "especially in a very special situation such as the terrorist attack in Bali," said a source at the bank, in order that volatility of the rupiah is not "excessive". The bank said: "It is our policy to stand ready to intervene in the domestic foreign exchange market, mostly by selling US dollars against rupiah to prevent it from depreciating rapidly." Also there has not been any run on the banks on the scale of the crisis experienced a few years ago. However the bank remains cautious: "We will monitor closely the impact of the attack and take the necessary actions if required."