By Naima Sultana
The proposal to accord constitutional status to the Bangladesh Bank is unquestionably a timely and relevant demand for the country. The “Bangladesh Bank Order, 1972” was among the essential structural frameworks established after the independence.
However, over the ensuing five decades, Bangladesh’s economy has evolved into a multifaceted entity. As the nation aspires to transition from a lower-middle-income to an upper-middle-income country, strengthening the capacity, transparency, and autonomy of financial institutions has become a fundamental prerequisite.
In this context, the necessity of a robust, efficient, and politically neutral central bank cannot be overstated. A central bank’s role extends far beyond formulating monetary policy; it is integral to controlling inflation, maintaining currency stability, supervising the banking sector, and upholding discipline within the financial system.
Persistent allegations of corruption and malpractice, particularly in state-owned banks, underscore a critical truth: without genuine independence for the central bank, sound financial governance remains unattainable. Under the current framework, the Bangladesh Bank operates largely as an extension of the government bureaucracy, where political imperatives often override institutional interests in policymaking.
Thus, the proposal to elevate the central bank’s status through constitutional recognition is not only timely but necessary. If realised, it could provide financial and administrative independence to the central bank. However, legislation alone is insufficient. It must be complemented by transparent implementation, an impartial appointment mechanism, and insulation from political influence. Otherwise, any autonomy granted on paper will remain symbolic.
At the heart of institutional credibility lies the appointment process. This is especially vital for a central bank, where the governor serves as both the chief executive and the principal policymaker. Such appointments must be grounded in merit, experience, and neutrality. Appointments based on other considerations risk disastrous consequences.
The draft Bangladesh Bank Order 2025 proposes a new appointment procedure for the governor and deputy governors involving parliamentary approval and recommendations from a search committee, suggesting a shift towards democratic accountability. If enacted properly, this would establish a balance vis-à-vis the executive branch.
However, for the process to be credible, the formation of the search committee must be grounded in transparency and integrity. This body should be comprised of individuals with proven expertise in economics, banking, technology, and public administration, eschewing politically affiliated figures.
Furthermore, if the Prime Minister retains discretionary authority to override the committee’s recommendations, the entire process could become perfunctory. The legislation must explicitly prohibit the appointment of any candidate not shortlisted by the search committee.
Most critically, the individual appointed as governor must not only possess technical acumen but also the personal integrity and moral courage to withstand political pressure.
Equally problematic is the long-standing direct involvement of government officials in the central bank’s board of directors, which has effectively resulted in a dual governance structure. Such interference in policymaking and implementation undermines the bank’s autonomy. The removal of government officials from the board, as proposed in the new draft, is thus both bold and necessary. While a central bank can and should collaborate with the government, it must not function as a subordinate institution.
The suggestion to establish a technocratic board consisting of seasoned professionals in economics, banking, law, and risk management is a commendable initiative. If executed with rigour, this could significantly improve the quality of decision-making at the central bank.
However, care must be taken to ensure that political allies are not appointed under the guise of technical expertise. The inclusion of a provision that no individual outside the governor’s proposed list may be appointed is a positive safeguard.
The draft also proposes the creation of a Coordination Council, comprising the finance minister, commerce minister, planning minister, and the central bank governor. Its intended role is to harmonise macroeconomic policy particularly in relation to budgetary, monetary, and exchange rate policies which, in principle, is a worthwhile objective.
Yet, this proposal raises an important concern: could such a council serve as yet another conduit for political intervention? If it curtails the central bank’s independence in determining monetary policy, the consequences may include rising inflation, macroeconomic instability, and diminished investor confidence.
Thus, the council’s mandate must remain strictly advisory. Should the finance minister override the authority of the governor, the central bank risks being relegated to a mere executive arm of the state, executing instructions without autonomy.
The proposal to empower the central bank with mandatory bank resolution authority is also noteworthy. Bank resolution refers to the structured intervention in failing financial institutions through restructuring, acquisition, or closure to prevent systemic risk. At present, Bangladesh lacks such a mechanism, allowing underperforming banks particularly state-owned and weaker private entities to persist despite chronic inefficiencies.
Granting this authority under the “Bangladesh Bank Order 2025” is a prudent move. A resilient banking sector requires a strong supervisory and resolution framework. The establishment of a dedicated resolution unit, risk-based supervision, and the ability to implement rapid reform will significantly bolster the central bank’s regulatory capacity. However, to avoid misuse, this power must be accompanied by stringent transparency, oversight, and judicial accountability.
The essential question remains: will Bangladesh Bank attain genuine independence if the proposed reforms are enacted?
Laws, in themselves, do not guarantee autonomy. They merely provide the scaffolding. True independence arises from the consistent enforcement of those laws and, most importantly, from the political will to uphold them.
There are many commendable elements in the draft order — parliamentary oversight, a structured appointment process, professional representation on the board, enforceable removal clauses, and the formation of a resolution unit. Yet the real test lies in their implementation.
Will a qualified and principled governor be appointed, or will partisan loyalty dictate the selection? Will parliamentary approval serve as a robust vetting mechanism or devolve into mere rubber-stamping? These are the critical questions.
Ultimately, if political leadership continues to exert undue influence over the central bank’s policies, even the most well-crafted legislation will prove ineffective. History bears witness to numerous such precedents. Hence, while this law is a promising start, true independence will only be achieved when political leaders and civil servants not only respect its letter but also uphold its spirit in practice.
