The recent change in the position of Bangladesh Bank governor has sparked much debate across the country. Many expected Dr Ahsan H Mansur to complete his full term, till August 2028. That was wishful thinking as political governments typically appoint their own people to lead ministries, departments and institutions, a common practice worldwide. Some argue that the central bank governor’s role is highly specialised and technical, and given the organisation’s importance, it should stay above politics. Moreover, no government should be able to remove a governor before their term ends. We have seen how Jerome Powell, despite attempts by the US president, could not be removed because the chair of the Federal Reserve is protected by law.
However, in Bangladesh, where institutions are fragile and governance often relies on expediency rather than norms and due process, this expectation is unrealistic. In such an environment, power frequently bypasses rules and proper procedures are replaced by political motives. Yet, adhering to established norms is crucial here as institutions need stability and respect that only proper procedure can provide.
While a change in the central bank leadership might be anticipated, how it is managed reveals the resilience and maturity of our institutions. The governor’s role goes beyond mere employment. It embodies reliability and public trust in the financial system. If this transition was inevitable, it could have been handled with more finesse. Announcing the removal through the media and the suddenness of the exit diminish both the individual’s and the institution’s dignity. Despite any policy disagreements, the governor who led the central bank during challenging times deserved formal communication and a respectful farewell.
The appointment of the new governor, announced on the same day, has also generated curiosity as well as criticism, with his qualifications, profession and party affiliation being discussed publicly. This, again, is an exclusive issue for the government as such appointments are not made through a structured recruitment process.
The process of selecting a central bank governor varies across countries. But in most established democracies, it is designed to balance professional competence, institutional independence, and democratic accountability. Professional credibility and macroeconomic expertise are key criteria for the appointment. While the executive branch usually plays a central role in appointments, safeguards are often built in to prevent arbitrary removal and to protect the institution’s autonomy.
In many advanced and emerging economies, three common features are observed in the appointment of a central bank governor. First, the appointment is formalised through legal procedures rather than informal political decisions. Second, fixed terms are provided to protect policy continuity. Third, removal before the end of term is either legally restricted or politically costly. In some countries, parliamentary hearings or legislative confirmations add an additional layer of transparency.
The underlying principle is clear. While central banks are accountable to the state, they must be insulated from day-to-day political interference. Monetary policy decisions, such as setting interest rates, managing liquidity, or supervising banks, require technical judgement and long-term vision. If governors can be appointed or dismissed abruptly without due process, markets may question the institution’s credibility.
With the appointment of a new governor, there is an expectation that the reform processes started by Dr Mansur will persist to help the banking sector better serve the economy. Additionally, it is hoped that the new governor will uphold the institution’s independence and integrity against any threats. The new governor must ensure that BB’s capacity to make monetary and financial stability decisions is independent and not influenced by short-term political pressures, particularly those related to electoral cycles.
Countries such as New Zealand, Canada, the UK, Sweden, Germany, Chile, India and the US illustrate that independent central banks have managed crises effectively. New Zealand pioneered inflation targeting with operational autonomy and transparency. Canada and the UK navigated financial crises through credible, data-driven policy actions. The European Central Bank demonstrated decisive leadership during the euro area sovereign debt crisis. Chile’s constitutional entrenchment of central bank independence helped overcome a history of high inflation. India strengthened its monetary framework in 2016 by formally adopting inflation targeting. These examples show that independence enables decisive, credible, and forward-looking action. Conversely, episodes such as Germany’s hyperinflation in the 1920s, Argentina’s recurring crises, Zimbabwe’s economic collapse, and the US “Great Inflation” in the 1960s and 1970s highlight the risk of political influence over central banks.
In Sri Lanka, even within a fragile framework, in the absence of a modern Central Bank Act, decisive monetary tightening, exchange rate adjustment, and coordinated stabilisation measures succeeded in reducing inflation from nearly 70 percent to single digits and averting systemic banking collapse in recent times. This highlights both the high cost of delayed institutional reform and the enduring power of firm, professionally guided policy action.
While the independence of the central bank is of utmost importance, it must be matched by accountability. Like many countries, the Bangladesh Bank must explain its decisions transparently, report to parliament, communicate openly with the public, and justify policy actions. Independence and accountability must go hand in hand. Without transparency and democratic scrutiny, independence would lack legitimacy. Without independence, accountability would be meaningless because decisions would be politically driven. In the end, safeguarding BB’s independence is essential to securing sustainable growth and shared prosperity in the country.
