Bangladesh Bank was established under the supervision of the Ministry of Finance after independence of Bangladesh with the Bangladesh Bank Order, 1972 to control the monetary and credit system of Bangladesh. The key objectives of the bank was to stabilizing domestic monetary value and maintaining a competitive external per value of Bangladesh taka towards fostering growth and development of the country’s productive resources in the best national interest. The bank’s functions as mentioned in the Bangladesh Bank Order 1972 and the Bangladesh Bank (Amendment) Act 2003 are: to formulate and implement monetary policy and to formulate and implement intervention policies in the foreign exchange
markets; give advice to the government on the
interaction of monetary policy with fiscal and exchange rate policy; hold and manage
the official foreign reserve of Bangladesh to promote, regulate and ensure a secure
and efficient payment system, including the issue of bank notes. Bangladesh Bank
also regulates and supervises other banking companies and financial
institutions in the country. However recently there are lots of debates on ‘the
full autonomy of Bangladesh Bank’. This autonomy mainly means both the
administrative and operational autonomy.
Central bank autonomy is a debatable issue
especially in the developing country like Bangladesh. Since it’s introduction
Bangladesh Bank- the central bank of the country is working under the tight
supervision and control of the Ministry of Finance. It is very common that
while a central bank work under the control of such political parties it cannot
work properly. Because mission, objectives and interest of these political parties can not be same as the interest of
the central bank. Therefore government always tries to influence over the
monetary policy of bank to gain only short-run political benefits. Whereas in
the apex of the financial system, central bank should enjoy full autonomy to
play roles for gaining long-term economic development through formulating and
implementing appropriate monetary policy and supervising the financial
institutions. Further it also may need to supervise the financial agenda of
the party in power and accordingly advice the
government too. Though recently National Parliament of Bangladesh has
sanctioned some autonomy to the Bank, however government still have control
over the Bank for the determination of interest rate, government borrowing,
appointment of governor and the bank officials, right of issuing bank’s own
instruments etc. Consequently Bangladesh Bank is enjoying only a partial or
limited autonomy.