The Storting realised that the objectives of monetary policy could be best achieved if the monetary system was shielded from the arbitrary intervention of the monarchy. The distance between the seat of government in Oslo and the central bank in Trondheim was a perhaps deliberate twelve day journey.28  26  A central bank requires mechanisms that ensure confidence. Kydland and Prescott demonstrated that policymakers who tried to pursue an optimal plan for economic policy may have a strong incentive to deviate from the same plan at a later point in time. This will be the case, even in the absence of news that would warrant a change in the plan (see Kydland F.E. and E.C. Prescott (1977), “Rules Rather Than Discretion: The Inconsistency of Optimal Plans”, Journal of Political Economy, Vol. 85, No. 3, pp. 473–491). The expression “tying oneself to the mast” encapsulates in a simple way how the central bank can avoid the dilemma that Kydland and Prescott describe. The traditional task of the central bank was to issue notes and coins and ensure a well-functioning payment system. But the payment system is only well-functioning when the public has confidence in the value of money. Thus, the primary duty of central banks is to ensure that the value of money is stable. The value of money relies on the confidence of the public that a responsible policy is being pursued. If a central bank is to keep its promise and deliver stable money, it is important that the political authorities stand behind it.
Let me elaborate on these two themes: why liberalise the financial sector, and why liberalise at a measured pace. In doing so, I will draw partly from Singapore’s experience. Singapore and Myanmar are two very different economies and it would be unwise to apply Singapore’s experience directly to Myanmar. But I think the overall lesson is relevant: It is critical to open up, but open up at a measured pace. Why financial liberalisation is important A well-developed financial sector can be a catalyst to spur and sustain economic growth. It will lead to more effective mobilisation of domestic savings, help to harness foreign savings, and improve the efficiency of investment allocation. And opening up the financial sector to foreign participation can play a critical role in catalysing the sector’s growth and development. A basic purpose of banking is the provision of credit for economic and social development. Large segments of the Myanmese economy and population do not have access to affordable funding. Foreign financial institutions can complement the local banks in effective credit intermediation. It will deepen the financial sector, thereby helping to raise household savings and divert funds away from the shadow financial system. Foreign financial institutions can provide a channel for Myanmar to tap into foreign savings to drive its growth, even as the country ramps up the mobilisation of domestic savings. This is  BIS central bankers’ speeches  1  particularly relevant for financing infrastructure development, which is critical to drive Myanmar’s economic growth.