Without independence, BB risks functioning as mere department of finance ministry

After the interim government took over, Ahsan Mansur was perhaps one of the few people who carried out some substantial and visible work. Those of us who closely observed and evaluated his actions tend to agree on one point: during the interim period, the economic sector was the only area where meaningful steps were taken. Compared to other sectors, this one saw concrete reform initiatives, particularly from the central bank.

If we look at the record, significant reforms were introduced in the banking sector. Changes were made to the boards of directors of several banks, and restructuring efforts began. The exchange rate situation improved, foreign reserves showed signs of recovery, and remittance inflows increased. These are not minor developments. I would suggest that during Dr Ahsan H Mansur's tenure, the economic sector experienced notable progress.

That said, it is also true that despite his goodwill and intentions, some reforms could not be completed. 

For example, we cannot claim that full monetary discipline was established. Nor can we say that a strong structure of accountability, transparency, and responsibility was fully institutionalised. Still, leaving those limitations aside, I would argue that his tenure left behind considerable achievements.

Now, the question is why he had to leave so abruptly. When a political government is elected, it certainly has the authority to appoint a new governor. It can reshuffle ministries and bring in people it considers more suitable or capable. That is not unusual. What surprised many of us, however, was the manner in which Dr Mansur's departure took place.

As far as we know, he did not receive a formal termination letter. He reportedly learned about his removal through news channels. To me, this indicates that proper institutional due process was not followed. When he left, there was agitation among central bank staff, and he had to leave amid that unrest. 

A newly elected government has every right to bring in new leadership, but there is also a matter of institutional etiquette. A proper and respectful transition would have reflected better on the system.

If we think about the monetary and banking reforms initiated during this period, important groundwork has been laid. Discussions had also begun on recovering embezzled funds that were laundered abroad. These were serious steps.

I would like to highlight three concerns about what might happen in his absence.

First, regarding reforms: Many of the recent monetary and financial reforms were undertaken on our own initiative. In the past, such reforms often came in response to directives from institutions like the IMF. This time, however, there was an effort to act proactively. Don't we want a financial sector that operates under a proper system? Don't we want transparency and accountability? Don't we want structural changes that strengthen the sector? Of course we do. These reforms had begun to move in that direction, and many of us appreciated that.

Second, we now have a newly elected government with many pressing political priorities. There are pending bills left by the interim administration, the referendum issue, implementation of the July Charter, and several other political commitments. 

My concern is how high financial sector reform will rank among these priorities. There is always the possibility that some regulatory frameworks could be rolled back. Much will depend on how seriously the new government chooses to prioritise economic and financial reform.

Third, and perhaps most importantly, just before the interim government's tenure ended, the issue of granting full autonomy to Bangladesh Bank resurfaced. Dr Mansur raised the matter and placed it before the interim administration, leaving it for consideration by the newly elected government. 

The future of many reforms depends heavily on this question of autonomy. Without real independence, the central bank risks functioning more as a department of the finance ministry rather than as the state's monetary authority. In such a scenario, vested interests could exert influence, and reform efforts could stall.

Ultimately, the future of banking and monetary reform in Bangladesh will depend largely on whether the central bank is allowed to operate as a truly autonomous institution. Without that foundation, sustaining meaningful reform will be extremely difficult.

Selim Jahan is a Professorial Fellow at the BRAC Institute of Governance and Development.