Finance adviser passes BB autonomy decision to next govt

The interim government has passed the much-talked-about reform plan to grant full autonomy to the Bangladesh Bank (BB) on to the next elected government.

Introducing sweeping amendments to a fundamental law such as the Bangladesh Bank Order during the interim government’s tenure may not be realistic, Finance Adviser Salehuddin Ahmed wrote in a reply to BB Governor Ahsan H Mansur yesterday.

“It would be more reasonable for the next elected government, after assuming office, to review and amend the Order as necessary,” he wrote in the letter.

In October last year, BB Governor Mansur sent a letter to the finance adviser requesting a legal overhaul of the 1972 Order. He sought greater autonomy for the central bank, aligning it with global standards and shielding the institution from political influence.

The proposals, backed by detailed justifications, aim to elevate the central bank leadership, restructure its board, and overhaul the appointment and removal process for top officials.

As the adviser did not respond and the interim government approached the end of its term, Mansur expressed concern over the delay at a public event last month. He said that passing the laws after the election would be difficult.

Days later, the International Monetary Fund (IMF) issued a statement quoting the government as reiterating its commitment to legal, institutional, and operational reforms for BB, while noting that key policy decisions would fall to the next elected administration.

In his letter to the governor, Ahmed, who is also a former central bank governor, took a cautious tone, saying that the Bangladesh Bank Order is a fundamental law governing the country’s central banking system. Any amendment requires careful consideration of the rationale behind the proposed changes.

“Therefore, it would be appropriate to conduct a detailed review of the proposed amendments and to hold consultations and discussions with key stakeholders and experts,” he wrote.

The finance adviser said the proposed amendments appear to require additional measures, including expanding the role and effectiveness of the existing coordination council and strengthening accountability frameworks to ensure good governance in banks and non-bank financial institutions.

“I have taken note of various aspects of the proposed amendments put forward by Bangladesh Bank, particularly issues relating to the appointment and removal of top officials, upgrading the governor’s status to that of a minister, restructuring the board, and the independence to create financial liabilities on behalf of the republic,” Ahmed added.

He said that under the existing law, BB already enjoys operational and functional independence, with no government interference in policy formulation or operations.

Amending the Bangladesh Bank Order topped the reform agenda that the interim government had pledged following the July uprising in 2024.

The IMF has long advocated greater autonomy for the central bank and provided technical support in drafting the amendments under its $5.5 billion loan programme.

The interim government informed the IMF about the delay. The Fund said that postponing banking and fiscal reforms could weaken growth, push up inflation, and heighten macro-financial risks.

Zahid Hussain, former lead economist at the World Bank’s Dhaka office, said the delay is “hard to explain” given the preparation of the drafts.

“This is not a new file,” he told The Daily Star.

Hussain said the drafts were developed after extensive discussions, including coordination committee meetings with the finance ministry, BB, and other stakeholders. The reforms were outlined in IMF mission reports and incorporated into the government’s Letter of Economic and Financial Policies, signed by both the finance minister and the BB governor.

“After that process, the role of the finance ministry is straightforward. It should review the draft, clear it, or clearly explain why it cannot be cleared,” Hussain said.

Leaving the file idle for months raises questions, he added.

The economist said the delay shows resistance linked to authority rather than technical disagreements. “One key element of the reform is reducing the representation of the finance ministry on the Bangladesh Bank board. From that perspective, the issue is control,” he said.

Hussain added that central bank independence should not be defined narrowly. “It is not only about fiscal dominance. It also involves bureaucratic dominance and influence from business lobbies.”

According to the economist, passing the reform laws now would clarify where institutions and political actors stand, rather than deferring responsibility to the next government.