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Key Banking Reforms Stall in Bangladesh as Interim Govt Nears Exit

With less than two weeks left in office, Bangladesh's interim government has failed to pass two critical banking reform laws deemed essential by the central bank. The pending legislation aims to enhance the autonomy of the Bangladesh Bank and reform bank ownership and governance structures, which were top pledges after the 2024 uprising. The International Monetary Fund has consistently pushed for these reforms under its loan program and warns that delays could weaken growth and heighten financial risks. Despite central bank submissions and revisions, the draft laws remain stuck at the finance ministry, with officials fearing the window for passage before the national election is closing.

Key Points: Bangladesh Banking Reforms Stalled Before Election

  • Two key banking laws pending
  • IMF warns of economic risks
  • Central bank autonomy reforms stalled
  • Governance changes for banks delayed
  • Reforms pledged after 2024 uprising
3 min read

Once top of Yunus-led interim govt's agenda, key banking reforms remain stalled

Critical banking reform laws remain stuck in Bangladesh, delaying central bank autonomy and governance changes urged by the IMF.

"Delays in banking and fiscal reforms could weaken economic growth, fuel inflation and heighten macro-financial risks. - IMF"

Dhaka, Feb 1

With barely two weeks left in office, the interim government has yet to pass two critical banking reform laws that the central bank says are essential for strengthening regulatory oversight of Bangladesh's financial sector, local media reported on Sunday.

The pending laws relate to enhancing the autonomy of the Bangladesh Bank (BB) and reforming the ownership and governance structure of banks.

Both measures were at the top of the reform agenda pledged by the interim administration in the aftermath of the July uprising in 2024, reports a leading Bangladeshi newspaper, The Daily Star.

The International Monetary Fund (IMF) has also consistently pushed for greater autonomy for the central bank and, under its $5.5 billion loan programme, provided technical assistance for drafting the proposed amendments.

Despite this, both draft laws remain stuck at the finance ministry. The Bangladesh Bank submitted the proposals several months ago and has repeatedly urged the government to ensure their passage before the national election scheduled for February 12.

So far, the interim government has enacted only two banking-related laws: the Bank Resolution Ordinance and the Deposit Insurance Ordinance.

Central bank officials say progress on the remaining drafts has stalled, including proposed amendments to the Bangladesh Bank Order, 1972, and the Bank Company Act.

In a press release issued on Saturday following its Article IV consultations, the IMF warned that delays in banking and fiscal reforms could weaken economic growth, fuel inflation and heighten macro-financial risks.

Bangladesh Bank Governor Ahsan H. Mansur also raised concerns over the delays during a public programme last week, cautioning that passing the laws after the election would be difficult, the local media report said.

According to officials, the original draft amendment to the Bangladesh Bank Order proposed removing bureaucrats from the BB board, which currently includes three government officials, the report added.

However, after objections from the finance ministry, the proposal was revised to allow the presence of one bureaucrat instead of three.

The amendment also seeks to elevate the Bangladesh Bank governor to the rank of a minister and mandates that the governor take an oath before the chief justice. Despite these revisions, the proposal has yet to receive approval.

The second major pending reform involves amendments to the Bank Company Act. The BB board approved this draft in October last year and forwarded it to the finance ministry, but it has not moved forward since then.

With time running out for the interim administration, central bank officials fear that failure to pass the remaining reforms before the election could undermine efforts to strengthen financial sector governance and regulatory independence.

- IANS

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Reader Comments

P
Priya S
Very disappointing. The interim government had a clear mandate for reform. Stalling on these critical laws just shows a lack of political will. The finance ministry's objection to removing bureaucrats from the board is telling—they don't want to let go of control. 🇧🇩
A
Aman W
As an Indian watching our neighbor, I feel this is a crucial lesson. We've seen the benefits of a relatively autonomous RBI. A strong, independent central bank is non-negotiable for economic stability. Bangladesh should not delay this.
S
Sarah B
The IMF warning about inflation and growth risks is serious. When reforms tied to a loan program get stalled, it shakes investor confidence. Ordinary citizens end up paying the price through higher prices and economic uncertainty.
V
Vikram M
While the need for reform is clear, perhaps there is a valid reason for the delay that isn't reported? Rushing complex financial laws in the final days of an interim govt might not be ideal either. Due process is important, even if it's frustrating.
K
Kavya N
The part about the governor taking an oath before the chief justice is interesting. It formalizes the role's independence. Hope Bangladesh can get this done. A stable and prosperous neighborhood is good for all of South Asia, including India. 🤝

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