15 March 2016 (as I started to draft the article on that day)
Yesterday, two important things happened that will impact the lives of people in #Bangladesh for years to come. Let us talk about the first One that took place first.
Dr. Atiur Rahman, the Governor of the Central bank or the Bangladesh Bank as it was Christened, resigned from his post after 7 successful (disputed by many) years following the incidence of money being illicitly siphoned of the central bank reserve. That the money stolen was part of the reserve kept in US Federal Reserve Bank in New York is but a small anecdote. The actual incidence of stealing actually happened in early February, and the Bangladesh Bank people in their infinite wisdom manged to keep it secret from the other branches of the State for almost a month! This move, politically and administratively an error of horrendous proportion, probably cost the fellow his job. Nevertheless, it is how things unfolded in reality and by the time I am putting pen to paper, this Holywoodesque story captured the imagination of the country and to some extent that of some parts (banking & finance) of the world. So, why or how it happened is anybody's guess and subject to dozens of investigation. Therefore, I will conveniently bypass those questions (for you to be wiser from mainstream media) and focus on a more fundamental question.
Bangladesh Bank, which was formed in the immediate aftermath of the bloody liberation war (in fact, 16th Dec 1971 or the Victory day of Bangladesh is the official Birthday of Bangladesh Bank), many would argue, never really came out of the shadow of the Executive branch of the government. It was directly and indirectly controlled by the ministry of Finance. Therefore, It came as no surprise that once the Bank got its first 'Independent thinking' Pilot in Dr. Atiur Rahman, there would be a host of powerful people who would hate the very idea of the central bank having its own strategy and a path to achieve those strategy. To be more specific, the bank under his leadership focused on bringing the un-banked poor (the vast majority of the populace who were mostly out of formal banking system) into the banking system. He understood early that the brick and mortal approach will itself not achieve his dream. Rather, Dr. Atiur aimed to do this by utilizing the phenomenal growth of mobile technology, through encouraging mobile banking even to the extent where he formulated regulation for motivating commercial banks to have mobile banking arms. He also implemented a '10 taka bank account' for the rural poor (an account for 10 cent only), that attracted praise and following from the Prime Minister of India himself. Did his approach work? According to a feature published in the Daily Star (23rd March 2015), these strategies brought in 55 million people into banking sector, with 25 million mobile banking accounts and 10 million '10 taka' accounts targeting farmers! Towards financial inclusion | The Daily Star Well, that should be called a success even by the most cynical. However, bringing people into the scion of formal banking in itself is not the end, rather it opens up opportunities and economic emancipation in many other ways (including, but not limited to influencing how expat workers choose to send money home!) that I think is beyond debate. Now, praising the erstwhile Governor is not the idea of this write up, rather, to focus on the issue of central bank independence. So, it was beyond doubt that the central bank was gradually taking a more autonomous form. But, why is it important for a central bank to have independent thinking?
Well, to answer in plain words, central banks are for people's economic right what judiciary is for people's moral and legal right. A balancing act against the all powerful Executive branch, preventing it from implementing vested agenda or policies with too narrow a focus or politically motivated. Central banks also have the research capability and know how regarding economic and monetary matters that departments with in executive branch are not likely to have. All in all, importance and necessity of central bank independence is unquestionable. Example???? Just look at the major and successful economies of the world and you will not see any detractors to this doctrine. There can be varying degrees to that freedom, with the system of USA allowing most freewill to it Federal Reserve Bank (ironically, from where this current debacle of Bangladesh central bank started causing all those dominoes to fall). Fate sometimes can work in miraculous way indeed! However, it's important for people of Bangladesh to not get blinded by the rage of loosing all those hard earned money to robbers. It will not be prudent in infinite hatred to the outgoing Governor forget all the good things happened due to having an free thinking economist in the helm of Bangladesh Bank. And, the worst thing would be to give a free reign to the executive branch to reestablish their blindfold control on the central bank and trust, given the slightest opportunity the vested groups will gleefully gobble up the chance. And, without even a polite thank you!
So, what should be your course of action? Stop taking part in the slanderous and often suicidal discussion centering on how incompetent the outgoing management of central bank was. Rather focus on how to carry on the good deeds forward.
(I took too much time on topic number one, so, the 2nd one will have to wait for the next post). Thank you.
Yesterday, two important things happened that will impact the lives of people in #Bangladesh for years to come. Let us talk about the first One that took place first.
Dr. Atiur Rahman, the Governor of the Central bank or the Bangladesh Bank as it was Christened, resigned from his post after 7 successful (disputed by many) years following the incidence of money being illicitly siphoned of the central bank reserve. That the money stolen was part of the reserve kept in US Federal Reserve Bank in New York is but a small anecdote. The actual incidence of stealing actually happened in early February, and the Bangladesh Bank people in their infinite wisdom manged to keep it secret from the other branches of the State for almost a month! This move, politically and administratively an error of horrendous proportion, probably cost the fellow his job. Nevertheless, it is how things unfolded in reality and by the time I am putting pen to paper, this Holywoodesque story captured the imagination of the country and to some extent that of some parts (banking & finance) of the world. So, why or how it happened is anybody's guess and subject to dozens of investigation. Therefore, I will conveniently bypass those questions (for you to be wiser from mainstream media) and focus on a more fundamental question.
Bangladesh Bank, which was formed in the immediate aftermath of the bloody liberation war (in fact, 16th Dec 1971 or the Victory day of Bangladesh is the official Birthday of Bangladesh Bank), many would argue, never really came out of the shadow of the Executive branch of the government. It was directly and indirectly controlled by the ministry of Finance. Therefore, It came as no surprise that once the Bank got its first 'Independent thinking' Pilot in Dr. Atiur Rahman, there would be a host of powerful people who would hate the very idea of the central bank having its own strategy and a path to achieve those strategy. To be more specific, the bank under his leadership focused on bringing the un-banked poor (the vast majority of the populace who were mostly out of formal banking system) into the banking system. He understood early that the brick and mortal approach will itself not achieve his dream. Rather, Dr. Atiur aimed to do this by utilizing the phenomenal growth of mobile technology, through encouraging mobile banking even to the extent where he formulated regulation for motivating commercial banks to have mobile banking arms. He also implemented a '10 taka bank account' for the rural poor (an account for 10 cent only), that attracted praise and following from the Prime Minister of India himself. Did his approach work? According to a feature published in the Daily Star (23rd March 2015), these strategies brought in 55 million people into banking sector, with 25 million mobile banking accounts and 10 million '10 taka' accounts targeting farmers! Towards financial inclusion | The Daily Star Well, that should be called a success even by the most cynical. However, bringing people into the scion of formal banking in itself is not the end, rather it opens up opportunities and economic emancipation in many other ways (including, but not limited to influencing how expat workers choose to send money home!) that I think is beyond debate. Now, praising the erstwhile Governor is not the idea of this write up, rather, to focus on the issue of central bank independence. So, it was beyond doubt that the central bank was gradually taking a more autonomous form. But, why is it important for a central bank to have independent thinking?
Well, to answer in plain words, central banks are for people's economic right what judiciary is for people's moral and legal right. A balancing act against the all powerful Executive branch, preventing it from implementing vested agenda or policies with too narrow a focus or politically motivated. Central banks also have the research capability and know how regarding economic and monetary matters that departments with in executive branch are not likely to have. All in all, importance and necessity of central bank independence is unquestionable. Example???? Just look at the major and successful economies of the world and you will not see any detractors to this doctrine. There can be varying degrees to that freedom, with the system of USA allowing most freewill to it Federal Reserve Bank (ironically, from where this current debacle of Bangladesh central bank started causing all those dominoes to fall). Fate sometimes can work in miraculous way indeed! However, it's important for people of Bangladesh to not get blinded by the rage of loosing all those hard earned money to robbers. It will not be prudent in infinite hatred to the outgoing Governor forget all the good things happened due to having an free thinking economist in the helm of Bangladesh Bank. And, the worst thing would be to give a free reign to the executive branch to reestablish their blindfold control on the central bank and trust, given the slightest opportunity the vested groups will gleefully gobble up the chance. And, without even a polite thank you!
So, what should be your course of action? Stop taking part in the slanderous and often suicidal discussion centering on how incompetent the outgoing management of central bank was. Rather focus on how to carry on the good deeds forward.
(I took too much time on topic number one, so, the 2nd one will have to wait for the next post). Thank you.
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