Bangladesh Bank Reform: Changes and Challenges

The Bangladesh Bank, the central bank of Bangladesh, has been subject to an ongoing series of reforms. This paper provides an analytical description of the structure of the Bangladesh Bank; it reviews the reforms from their inception in 1982 through the current Central Bank Strengthening Project and assesses their impact on the Bank’s performance and autonomy. The Grilli-Masciandro-Tabellini (GMT) indexes for political and economic autonomy are calculated. The Bangladesh Bank ranks below its peers in both GMT measures. The study found that government borrowing from the central bank and the formal banking sector is opined to be detrimental to the financial sector. Loan default is a major problem afflicting the country’s banking as well as financial sector. The paper suggests that the regulation and supervision activities of the central bank should be decentralized and outsourced by creating new agencies. Less government influence reduced mandatory participation from the executive wing in the central bank affairs and most importantly less politicization would help create a more autonomous and professional environment for the central bank.

Author: Ahmed, Haydory Akbar
Type: Working paper
Year: 2007