The real crisis at Bangladesh Bank: The mandate, not the résumé

The removal of Ahsan H Mansur as Bangladesh Bank (BB) governor has been an entirely avoidable drama that has poisoned optics about the new BNP government’s policy sagacity. Compounding these optics is the appointment of Md Mostaqur Rahman as the new governor, which has sparked predictable debate over conflicts of interest. An active garment factory owner regulating the financial sector is an obvious anomaly, but the controversy over his résumé obscures the larger issue. More than the credentials, the deeper unease is about the potential shift in the mandate of the central bank—from protecting macroeconomic stability to prioritising industrial credit expansion and how specifically this shift will be crafted under the new order.

The official narrative, promoted by the finance ministry, argues that BB must abandon the “rigidity” of traditional monetary thinking in favour of business-like efficiency. To deliver on its 2026 commitments, the government is pursuing fast, investment-led growth. Arguably, there may be merit in this narrative. After all, growth at under four percent is indeed stagnant and prioritising economic recovery meets both popular and political expectations. The concern is how specifically the blurring of the boundaries between monetary restraint and political ambition will be navigated.

Bangladesh Bank is not the Ministry of Industries. Its role is to achieve and maintain stability: managing liquidity, anchoring prices, and safeguarding the taka. Placing an industrialist at its helm changes that balance. Early policy signals point towards easier liquidity conditions and regulatory flexibility for distressed corporate borrowers. The justification is factory revival. But expanding credit is not the same as expanding productivity. The experience of the last decade shows that liquidity without structural reform can inflate corporate balance sheets while wages stagnate. Bangladesh has already experimented with repeated loan rescheduling and refinancing windows over the past decade—measures that boosted credit on paper but did little to reverse wage stagnation or resolve structural non-performing loan risks.

The Hasina regime did not merely centralise power. It centralised credit and socialised the losses. The banking system became a pipeline for preferential capital allocation, with losses from connected defaults ultimately absorbed by the public. Nominal growth figures improved. Yet by 2024, real wages had declined and middle-skill job creation lagged. The expansion proved uneven and fragile.

Redirecting monetary policy towards sector-specific credit objectives does not necessarily dismantle that pattern. It risks entrenching it under new leadership. Once monetary policy becomes aligned with sectoral objectives, reversing course becomes politically costly, and institutional independence erodes incrementally rather than dramatically. While the faces may change, the structure of credit allocation remains largely intact.

Short-term indicators may look favourable. Exports may rise and growth rates may tick upward. But suppressing borrowing costs to refinance distressed corporate debt increases liquidity without necessarily increasing productivity. The resulting pressure is inflationary. Inflation is not abstract. It erodes purchasing power most severely for those without assets. A corporate executive can hedge against currency weakness; a farmer or wage earner cannot.

The consequences are long-term. By the mid-2030s, Bangladesh’s demographic dividend will narrow as dependency ratios rise, making disciplined capital allocation not optional, but essential. That urgency demands investment in agriculture, middle-skill manufacturing, green infrastructure and the promotion of new growth drivers, not narrowly the refinancing of concentrated corporate exposure.

Bangladesh sits on a triple cusp of political, economic, and demographic transition. Crafting the economic roadmap ahead will be a critical test of the political sagacity, economic policymaking, and execution capability of the BNP leadership team. The starting point is a very unfavorable one in economic terms—severely squeezed finances due to the punishing debt-servicing burden on one hand and stagnant revenues on the other.

The Bangladesh Bank saga has to be read within these defining realities. A simplistic framing of speed over stability may give a short-term growth boost while deepening underlying fragilities. These fragilities relate to where institutional integrity stands and which voices get to dictate the small prints of monetary policymaking. The unease over the governor saga ultimately is about these political economy fault lines, not about résumé per se. The cautions have been sounded and the new team at helm of affairs will do well to pay heed.

Dr Hossain Zillur Rahman is executive chairman at Power and Participation Research Centre (PPRC).

Saba El Kabir is founder of Cultivera, and institutional sustainability adviser at PPRC.

Views expressed in this article are the author's own. 

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