Full autonomy to empower central bank

FE Team | Published: October 24, 2025 21:25:54

The move is on to bring an end to the legacy of bureaucratic control of and political interference in the central bank of Bangladesh. It is difficult to predict the final outcome. However, the Bangladesh Bank Board through approving the draft amendment to the Bangladesh Bank Ordinance 2025, which is now awaiting final nod of approval by the Advisory Council of the interim government, has made a strong bid in favour of the central bank's autonomy.
The BB's move has already been appreciated different quarters. It is important to note at this point that the urgency of the issue was also appreciated at a recently organised roundtable, titled, 'The Imperative for Central Bank Independence', where among others, Mr Amir Khasru Mahmud Chowdhury, former commerce minister and a stalwart of the Bangladesh Nationalist Party (BNP), has also stressed the central bank's independence as 'very vital for the country's macroeconomic sustainability'. It is gratifying to observe the support coming from the leader of a very potential power contender to the reform initiatives for the BB. This is because the governing political parties, including the immediate past autocratic one, used the central bank to protect the loan sharks belonging to their respective clans.
However, assurances from political leaders apart, the central bank's autonomy would finally depend on the academic excellence, expertise, and, most importantly, the personal integrity of the person in charge of banking regulator. Instances of academically very bright people at the steering wheel of very vital and sensitive organs of the state including the central bank bowing easily to political pressures, abound. In the case of the past autocratic regime, the central bank authority was too pliant to follow the dictates of the government so much so that it framed its monetary policy to meet short-term goals like providing economic stimulus or resorting to deficit financing. Without leaving the bank lending rate or exchange rate of taka to the forces of market, it kept the lending rate capped for a considerable period of time and the exchange rate was kept unchanged to suit the interests of the powers that be.
So, with the granting of full autonomy, it is expected that the central bank would play its role as regulator and leader of the banking system as 'bank for banks' and would be able to do its main job of managing the country's currency and monetary policy efficiently, with the primary objective of taming inflation and stabilising consumer price. Again, it would also fix interest rates to influence borrowing and spending in the economy as well as controlling the supply of money and reserves. In this connection, some experts at the roundtable expressed the view that the country should have a clearly-defined monetary policy role with explicit legal provision to stop government lending and that the central bank should be able to prepare its own budget. Such functions should patently fall within the purview of a truly independent central bank. While all these issues will be open to discussions and recommendations from pundits in the field in question, the final say, however, lie with the political power in office and its good will. Hopefully, the country's central bank will be able to exercise the power granted to it once its full autonomy is granted.