Narrow income disparities through reforms, says Zeti

Asian central banks must introduce policies and reforms to address the widening income disparities to prepare the regional economy for the future.

Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz said this would be one of the ways to effectively manage infrastructure development and urbanisation.

"This will accord environmental sustainability and finally that will accord importance to governance, accountability and integrity in the implementation and execution of the many endeavours to achieve a sustainable advancement.

"We now need to prepare ourselves for the future," she said at a dinner organised by the Bank for International Settlements in Shanghai on Monday.

Zeti said among the future challenges that would likely confront Asia was whether its prevailing growth model was sustainable given the consequences from the erosion of demographic advantage, rising indebtedness and rising cost of living in an apparent period of low inflation.

For most central banks in the emerging world, she said they were expected to contribute towards addressing many of these challenges both directly and indirectly.

She highlighted that central banks assumed an important role in providing support to address various issues such as financial inclusion, financing of infrastructure or putting in place financial and social safety nets or environmental sustainability.

"It has been my experience that the participation of the central bank in many of these agendas will require careful boundary management and a signing off when it is completed so that it does not remain permanently with the central bank.

"Of great importance in this process is also to carefully safeguard the independence of the central bank," she added.