Parliament withdrew from its agenda a highly controversial draft amendment which would have strengthened the government's power over the central bank, Slovak Finance Minister Miroslav Maxon announced on May 18.
"I informed [OECD Secretary General] Donald Johnston last week that the central bank amendment had been withdrawn from the parliament," Maxon told a news conference. The Organisation for Economic Cooperation and Development (OECD) has been monitoring the progress of the amendment
Maxon added that his ministry and the National Bank of Slovakia (NBS) had been working on a new proposal to amend the law, but explained that the new legislation will be discussed by a new parliament formed after September's general elections.
" We are working with the central bank on a complex revision of the central bank law, but no such legislation will be approved during the current government's term in the office," Maxon said.
The amendment's provisions included an increase in the number of NBS Bank Board members from eight to ten, five of whom would be named by the government. In addition, the draft envisaged increasing the central bank's participation in short-term funding of the state budget deficit.
The draft also proposed to give Parliament the right to approve the central bank's budget. NBS Governor Vladimír Masár has described this as the "most problematic" proposal because it could limit the amount of money available to the central bank in pursuing its monetary policy.
The NBS has been running a tight monetary policy over the past few years because of expansive government spending and high domestic demand, which together have fuelled a large current account deficit. That policy has squeezed money market liquidity, but has made refinancing state debt through the local market very expensive.