BM Desk Report: In a landmark move aimed at strengthening monetary policy independence and improving financial governance, the Government of Bangladesh is finalizing a new ordinance to transform Bangladesh Bank into a constitutionally autonomous central bank, with sweeping administrative and financial independence.

The proposed legislation—Bangladesh Bank Order, 2025—will replace the Bangladesh Bank Order of 1972, which currently governs the institution. The reform seeks to enhance the central bank’s ability to independently oversee the financial system, amid growing concerns about fraud, political interference, and dual governance in the banking sector.

Key Features of the Draft Ordinance:

Full autonomy: Bangladesh Bank will be accountable solely to the National Parliament, eliminating oversight or interference from the executive branch.

Independent appointments: The governor and deputy governor cannot be appointed or dismissed without parliamentary approval.

Board restructuring: A new independent board of directors will be composed exclusively of banking and financial sector experts, with no bureaucrats allowed.

Ministerial rank: The governor’s position will be upgraded to carry the rank of a cabinet minister (Rank 4), significantly higher than its current position (Rank 14), which is below that of the Cabinet Secretary.

Operational Implications:

• Once enacted, the ordinance will give Bangladesh Bank exclusive authority over:
• Supervising and regulating all government and private banks
• Managing monetary policy and controlling inflation
• Ensuring stability in the domestic foreign exchange market
• Overseeing the appointment and promotion of executive personnel within the institution

The reforms are part of a broader government initiative to strengthen macroeconomic stability, restore public confidence in the banking system, and align Bangladesh with international standards of central bank independence.

Implementation Timeline and Leadership:

The draft ordinance is expected to be finalized and issued by December 2025. It has been prepared under the leadership of Saker Siddiqui, a former official of the U.S. Federal Reserve who now serves as a strategic advisor to Bangladesh Bank. The draft is scheduled to be submitted to the Office of the Chief Advisor for final review.

Background and Rationale:

Multiple high-profile financial frauds and persistent concerns over political interference in state-owned banks have intensified calls for reform. A senior official at Bangladesh Bank noted that “governance failures have eroded trust in the banking sector. This ordinance is intended to institutionalize the independence necessary for effective financial oversight.”

International financial institutions, including the IMF and World Bank, have long emphasized the importance of central bank independence in maintaining financial discipline, attracting investment, and controlling inflation. This ordinance is seen as a step in that direction.