The Department of Research and Statistics (DRS) of the Bank is responsible for policy formulation. Formulation begins with regular surveillance of key economic variables in the international economy, domestic economic activity, price developments, fiscal policy, monetary developments, exchange rate movements and the balance of payments. These variables are assessed in terms of their impact on inflation and international reserves, which are the ultimate monetary policy objectives of the Reserve Bank. Assessments are submitted to the Policy Coordinating Committee (PCC), comprising of staff of the Research and Statistics Department (RSD), and chaired by its Director of RSD, and the meeting is also attended by the Director of Financial Market Department (FMD). It meets once a month and its primary role is to provide advice on monetary policy to the Monetary Policy Committee (MPC) of the Reserve Bank.
The Monetary Policy Committee approves the policy stance of the Bank and notifies the Board of the Reserve Bank through its Chairperson. The Monetary Policy Committee comprises the Governor who is also the Chairperson of the Committee, the Deputy Governor, Director of Research and Statistics, the Director of Accounts and Customer Services, the Director of Financial Markets Department and the Director of Financial Institution Supervision Department. The role of the MPC is approving the monetary policy stance of the Reserve Bank. The MPC meets monthly.
The Board of the Reserve Bank is the ultimate decision making body. It comprises of four members, namely the Governor, who holds the chair and three other representatives, one of which is a representative of the Ministry of Finance and Economic Management. The Board can meet as many times as it considers necessary but not less than four times in one year.
Once the MPC decides on a policy, the Reserve Bank conveys the stance to the public along with the reasons, in the Bank’s view, as to why the decision was taken. This view is conveyed through regular meetings between the Governor and the Minister of Finance and Economic Management, the Governor’s Quarterly Meeting with the Bankers Association of Vanuatu and through various publications, press releases, and the Reserve Bank website. The press release to the public comes in the form of a Governor’s Monetary Policy Statement.