Economists attribute the surge in non-performing loans, escalating inflation, illicit capital outflows, and a recent rise in poverty rates in Bangladesh to the loss of autonomy by the Bangladesh Bank (BB).
According to a report by the Policy Research Institute (PRI), lenient regulatory policies have led to a significant increase in bad debts, totaling Tk 420,335 crore by March this year. PRI’s Principal Economist, Ashikur Rahman, highlighted that inflation spiked to 11.66 percent in July last year, surpassing levels in neighboring countries and reducing real incomes.
At a recent roundtable event titled “The Imperative for Central Bank Independence,” organized by PRI with support from UK International Development (UKID), recommendations were made to safeguard monetary policy, banking regulations, and government debt management from political interference to restore public trust in the financial system.
The outdated Bangladesh Bank Order-1972, despite amendments in 2003, was deemed inadequate for modern central banking functions by the PRI paper. The report emphasized the need to shield the central bank’s operations from external influence for effective monetary policy implementation.
Key figures from the political and economic sectors, including BNP’s Amir Khosru Mahmud Chowdhury and CPD’s Fahmida Khatun, expressed concerns over the lack of central bank independence impacting macroeconomic stability and financial sector performance. They stressed the importance of appointing qualified individuals to key positions within the central bank to uphold transparency and accountability.
Industry leaders such as Syed Nasim Manzur and Showkat Aziz Russell highlighted the adverse effects of abrupt policy changes on businesses, urging for consistent and sustainable banking policies to support economic growth.
The necessity for political will, regulatory reforms, and strategic interventions to address financial sector challenges was echoed by Syed Mahbubur Rahman and M. Masrur Reaz. They emphasized the critical role of effective governance and policy continuity in shaping a stable and competitive market environment.
In conclusion, the discourse around the independence of the Bangladesh Bank remains pivotal for ensuring economic stability and sustainable growth. PRI economist Ashikur Rahman emphasized the significance of central bank credibility in managing inflation and fostering economic stability, underscoring the need for policymakers to learn from past mistakes and prioritize financial sector integrity in future decision-making processes.