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Yonas Biru, PhD
Last updated January 21, 2023 at 6:52 P.M. Toronto Time
First, let me clear one point. Addis Media has a 13-minute video clip supporting the appointment of Mamo Mihretu as the Governor of the Ethiopian Central Bank (ECB). In it, it reported “Dr. Yonas Biru, who has been criticizing the Ethiopian government’s economic performance, has expressed support for the appointment of Mamo Mihretu with enthusiasm and optimism. He called the appointment the right decision.” This is simply not true. Neither in public nor in private have I supported the appointment.
There is a chorus of voice – each distinct unto itself but shares a general sentiment – expressing concern, bewilderment and even anguish, regarding Mamo’s appointment. Some raised his lack of experience and subject matter expertise to head the Central Bank at a time of economic turmoil. Others saw his prior professional association with the World Bank as a liability.
Those who supported his appointment summon his master’s degree from the Kennedy School of Government at Harvard and his work experience at the World Bank as qualifying pedigrees. One of the argument Addis Media presented is Jerome Powell, Chair of the US Fed. Powell holds bachelor’s degree in political science (Princeton University) and Law degree (Georgetown University). The argument is that one does not really need training in economics or sound experience to be Chair of the Fed or Governor of a National Central Bank.
What Addis Media and others who hold similar views miss is that Powell had extensive economic and finance background. He had served as an assistant secretary and as undersecretary of the U.S. Department of the Treasury. As a lawyer his experience was investment banking. he was also the head of a top private equity and asset management firm. His lifelong experience qualifies him for the job.
The immediate past chair of the Federal Reserve was Janet Yellen. She holds PhD in economics from Yale University. She was professor of economics at Harvard and London School of Economics. She was also the Eugene E. and Catherine M. Trefethen Professor of Business and Professor of Economics at the Haas School of Business and the University of California, Berkeley.
The Chair before her was Ben Bernanke. He was tenured professor at Princeton University and chaired the department of economics. He is also the winner of the 2022 Nobel Memorial Prize in Economic Sciences. The Fed, as Central Banks, is a critical position. It requires not only deep economic and financial knowledge but also cerebral professionalism to maintain the integrity and independence of the institution from political seduction to the extent possible.
No question that Mamo has an impressive background. He graduated from law school top of his class. He has worked in the World’s premier international economic agency and holds a graduate degree from Harvard in public policy. For me there are three reasons why his appointment concerns and worries me and why the Parliament should not approve his nomination.
First, Mamo is in the close circle of the PM’s management team. He is part of the government and a member of the Parliament, representing the PM’s Prosperity Party. The governor of the central bank should be independent. This is what is critical for the economy. This is a common practice in the world. The ECB, like the Ethiopian Human Rights Commission, needs to be completely independent of the governing party. Mamo’s appointment violates this cardinal rule. For this reason alone, the Parliament must not approve it.
Second, I do not believe he has sufficient experience in macro economics and finance to lead the ECB during a time of turmoil.
A third and less important point is that not even a year ago, the Prime Minister appointed Mamo to serve as the head of the nation’s sovereign wealth fund. This was a new institution with enormous responsibility of national significance. One would think it takes at least a year to warm up to the position and figure out the contours and kernels of all the moving parts of the new institution.
Not long ago, the Prime Minister was lecturing his subordinates about the five steps of team building, noting:
Stage 1: Forming – Develop the team to meet the objectives of the institution
Stage 2: Storming – Deal with emerging problems and adjust expectations and goals
Stage 3: Norming – Teams jell up together to work in harmony and increase productivity
Stage 4: Performing – Team becomes greater than the sum of its parts
Stage 5: Termination – Time for reform and reset as needed as the nation’s environment changes
If one is a good student of the PM’s lecture, it becomes clear that Mamo was hovering between stage 2 and 3 at best. The PM is moving him to a new position before his current institution reaches stage 4 – performing. At worst he is hovering between stages 1 and 2 and is leaving the institution before the norming stage, which is the most important part for a new institution.
No matter how one slices and dices it, it was not a prudent decision, to say the least.
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