Egypt's president Mohamed Morsi (R) meets with Dr. Farouk El Okda, Governor of the Central Bank of Egypt at the presidential palace in Cairo (Photo: Reuters)
President Morsi is set to issue a modification to two articles in the laws governing the Central Bank of Egypt within days, which grants himself more authority.
Notably, the modifications reduce the number of board members and alots the president the right to unilaterally nominate the next CBE governor without the usual recommendations from cabinet.
The cabinet already approved the president's modifications, according to a report by Al Ahram Arabic-language news website Tuesday.
Specifically, the number of regular bank board members are reduced by six, leaving six on the board.
Also, the new text omits the verbiage that specifies who will choose the two vice-governors, as well as the language that used to give authority to the CBE governor to appoint an undetermined number of deputies. The omission of the mention of deputies seems to translate into the omission of the post altogether.
Accordingly, the coming board of the Central Bank of Egypt will be reduced to only nine members (including the two vice-governors) plus the governor. Other members include the president of the Egyptian Financial Supervisory Authority, a representative of the minister of finance and four experts in monetary, financial, banking, legal or economic affairs chosen by Egypt's president.
This is in contrast to the current law of 2003, where the board is formed of 15 members plus however many deputies the CBE governor wishes to appoint.
In 2003 the ousted president Mubarak modified the law and was criticised for limiting the CBE's independence.
Morsi's decree further reduces expert membership on the board to four (as opposed to eight in the current law). It also removes the representation by the ministers of planning and foreign commerce, leaving only a representative of the finance ministry.
All over the world, governments lean towards more independence of its central banks. Although the central bank governor is usually nominated by the country's president, many countries limit the executive power to guarantee the central bank's independence by requiring approval by the legislature, as one example.
Morsi's modifications to the CBE laws comes in the wake of his issuance of a constitutional declaration on 21 November that gives himself sweeping powers which was partially rescinded under popular pressure on 8 December.