BB plans to finalize the 2025 Bangladesh Bank Ordinance draft to shield it from excessive political and private sector influence
August 10, 2025, 7am
Last revision: August 10, 2025, 07:28 AM
Highlights:
- Governor appointed through six independent search committees
- Governor can be removed only via Supreme Court procedures
- Bangladesh Bank gains full policy, financial and operational autonomy
- No government officials will be part of the Banking Committee or MPC
- New mandates focus on ensuring price and financial stability
- Reforms align with IMF suggestions for central bank independence
A significant step towards enhancing central bank independence is underway with the newly revised Bangladesh Bank Ordinance set to introduce a “double layer” system for appointing governors in 2025. This marks a pivotal departure from the current process heavily influenced by politics.
In the updated framework, the President will appoint governors based on recommendations from six search committees, aiming for more transparent selections.
The draft ordinance aligns with IMF guidance, aiming to shield central banks from political meddling and bring governance practices in line with global standards.
Presently, the 1972 Bangladesh Bank Order overly influences key appointments, raising concerns about political pressure. The new structure proposes stronger protections.
Under the “double layer” system, a search committee will be organized, with the final appointment resting with the President. Decisions by the search committee will require a majority, with provisions for resolving tie votes.
The draft stipulates that governors cannot be dismissed freely; removals must adhere to the complex judicial process similar to that of the Supreme Court.
Furthermore, the position of governor will be elevated to a ministerial level, allowing for enhanced decision-making autonomy.
The draft also includes significant changes to limit government input in the Bangladesh Bank’s board and monetary policy committee, clearly defining its mission to maintain price and financial stability while ensuring comprehensive autonomy in policies, finances, operations, and personnel. With the new ordinance, the Bangladesh Bank is expected to be established as a statutory entity.
This ordinance, backed by the IMF as part of a $4.7 billion loan agreement, aims to provide legal protections for the institutional and financial autonomy of the Bangladesh Bank, safeguarding it from excessive political and private sector influences.
On August 4, a draft was submitted by a task force led by Sabeth Sidike to financial advisor Salehuddin Ahmed at the Bangladesh Bank headquarters, in the presence of Governor Ahsan H Mansur.
Central bank sources indicate the draft has been sent to the IMF for review, which has approved of its progression.
Governor Mansur expressed that the goal is to fortify the Bangladesh Bank’s ability to resist political forces. He noted that in various countries, central banks operate within constitutional frameworks similar to the judiciary, or as independent statutory bodies, emphasizing the need for a robust legal framework to support such independence.
He cited the US Federal Reserve as an example, mentioning that it maintained its course despite political pressures, asserting the kind of independence they strive for here.
Search Committee Structure
A six-member search committee will be formed by the President to recommend candidates for the governor or lieutenant governor roles under this ordinance, comprising a former Minister of Finance, previous governors, and individuals with economics or finance expertise, including at least one woman.
Removal of Governors and Directors
The draft ordinances state that governors or senior directors can only be removed through the Supreme Judicial Council process, even amidst allegations of misconduct.
Reasons for Reforming the Bangladesh Bank Order
The IMF advocates for the amendment to the Bangladesh Bank Order to secure full autonomy and curb political interference. A recent report highlighted that the current order does not sufficiently guarantee legal independence for banks, with various sections providing the government with control that could limit operational effectiveness.
From a transparency viewpoint, accountability measures are deemed insufficient under the current framework, complicating the monetary policy communication processes.
The proposed 2025 framework aligns with practices adopted by peer institutions and adheres to the IMF’s guidelines, focusing on four main pillars: mandate, decision structure, autonomy, and transparency.
The ordinance clearly states the mission of the Bangladesh Bank to maintain financial stability, which is absent from the current order, establishing its authority over all banking regulations to ensure independence from government oversight.
Body Structure of Decision-Making
The draft ordinance prescribes that an independent Monetary Policy Committee will set interest rates, while the board will comprise various members, excluding government representatives.
Transparency and Accountability
The governor is tasked with ensuring accountability to a congressional committee, with explicit frameworks outlined for public reporting of financial performance.
Importance of Central Bank Independence
Governor Mansur pointed out that central banks must operate free from the sway of short-term political considerations to promote long-term economic stability and that core decision-making authority—over appointments and monetary policies—should reside with the Bangladesh Bank. He believes if the current administration can ensure this, it will leave a lasting legacy for national development.
Challenges Ahead
While political governments sometimes back these reforms, the governor expressed that history shows politicians themselves often initiate such changes. He emphasized that establishing robust international standards would complicate any attempts to reverse these reforms.
