PRI urges strong political commitment to monetary reforms, protection of Bangladesh Bank’s independence
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The Policy Research Institute of Bangladesh (PRI) has urged both the interim government and the incoming elected government to demonstrate strong political commitment to major reforms in the monetary and fiscal sectors, while safeguarding the independence of Bangladesh Bank.
“Central bank independence has strengthened across 155 countries, but in Bangladesh, autonomy has eroded, contributing to a fragile banking system and rising non-performing loans (NPLs) and deepening capital shortfall,” said Dr Ashikur Rahman, Principal Economist at PRI.
He made the remarks while delivering the keynote at a seminar at the PRI auditorium on Wednesday, marking the release of the latest issue of Monthly Macroeconomic Insights (MMI), prepared by PRI’s Centre for Macroeconomic Analysis (CMEA) in collaboration with the Department of Foreign Affairs and Trade (DFAT) of the Australian Government.
Dr Monzur Hossain, Member (Secretary) of the General Economics Division (GED) of the Planning Commission, attended as the chief guest. Economists, experts, and private sector representatives also spoke, with the session chaired by PRI Chairman Dr Zaidi Sattar.
Dr Ashikur highlighted that weak governance in the banking sector in the past led to the rise of powerful oligarchs, pushing the financial system to the brink of collapse.
He said that politically driven measures, such as interest rate caps of 6–9%, reflected elite influence over monetary and credit policies, undermining the central bank’s independence and effectiveness.
“Countries with more independent central banks are better able to control inflation,” he said, adding that central bank independence is synonymous with credibility.
If markets do not trust the central bank to manage inflation, exchange rates, and money supply, monetary policy cannot anchor inflation effectively, he explained.
He also pointed to structural weaknesses, noting that the Financial Institutions Division under the Finance Ministry and weak leadership over the past decade have curtailed Bangladesh Bank’s operational autonomy.
The financial sector remains fragile, he added, with NPLs reaching a record Tk 4.2 trillion in March 2025, a 21.6% rise from December 2024.
Dr Ashikur emphasized that independence does not mean isolation, stating, “Oversight and coordination with fiscal policy are essential, especially for developing countries”.
He also raised concern over the country’s low revenue base, noting that Bangladesh’s tax-to-GDP ratio fell to 6.6% in FY25, the lowest among regional peers, making ambitious development goals harder to achieve.
He urged the next elected government to provide a strong political commitment to central bank independence and financial sector governance.