Written by The Banking Post
The interim government has decided not to move forward with a proposal aimed at granting full autonomy to Bangladesh Bank, effectively stalling long-discussed reforms to strengthen the country’s central banking framework.
Sources at the central bank said the Ministry of Finance has blocked the amendment package to the Bangladesh Bank Order, with finance adviser Salehuddin Ahmed verbally informing Governor Ahsan H Mansur of the decision. Authorities have indicated that the changes will not be pursued during the tenure of the interim administration.
The proposed amendments, approved by the Bangladesh Bank board on September 16 last year, were later sent to the finance ministry for promulgation as an ordinance through the president. The proposal, however, remained pending for months before being put on hold.
The Bangladesh Bank Order 1972 is the founding law governing the central bank’s operations. The proposed revisions sought to significantly reduce government influence and enhance institutional independence.
One key change involved restructuring the central bank’s board by cutting bureaucratic representation from one-third to a single member. The remaining members were to come from the private sector, including economists, bankers, legal experts and industrialists. The governor would chair the board, joined by one deputy governor nominated by the governor.
The amendment package also proposed overhauling the appointment process of the governor, who currently holds ministerial rank. Instead of an appointment by the prime minister based on recommendations from a bureaucracy-heavy committee, a search committee would recommend candidates to the president. That committee would include the finance minister, the commerce minister and a serving or recently retired governor.
Changes were also planned to the removal process. The authority of the finance ministry to remove the governor was to be scrapped and transferred to a three-member committee drawn from the Appellate Division of the Supreme Court. The tenure of the governor and deputy governors was proposed at a minimum of four years, shorter than the six-year term initially sought by the central bank.
Another major provision would have allowed the Bangladesh Bank board to set salaries and benefits for its officials independently, instead of following the government pay scale.
Sources said the proposal ultimately failed to secure approval amid resistance from sections of the bureaucracy, bringing efforts to establish a more independent central bank to a halt for now.
