It is heard Abdur Rouf Talukder has reviewed a good number of files of the central bank ahead of joining as the governor. After that, he joined the central bank. The future will tell how, as a governor, he sheds the identity of a bureaucrat . It is to be seen how he will face the dictates of the financial institutions division of the finance ministry, which is dependent on bureaucracy in operating banks.
The task of governor
About the role of governor, Raghuram Rajan writes, "The Governor of the Reserve Bank is much more than just a regulator or a central banker. Since the RBI is both the lender of last resort, as well as the custodian of the country’s foreign exchange reserves, the Governor is the primary manager of macroeconomic risk in the country. If the Governor takes this role seriously, he (or she) has to warn when he fears the economy is in danger of going down the wrong path. As an apolitical technocrat, he can neither be a cheerleader for the government, nor can he be an unconstrained critic. This is a fine line to tread, and the Governor has to pick both the issues he speaks on, as well as the tone of his commentary, very carefully."
The role of central bank is more or less fixed in economy. Especially since the eighties, controlling the inflation is the main task and all central banks formulate monetary policy. Ahead of the pandemic, all central banks in the world faced trouble in controlling inflation. The inflation was low and many countries decreased the interest rate to zero. So the central bank had no economic arms in hand. After the pandemic, the Ukraine war has made the role of the central bank vital. All countries, big or small, are struggling to control inflation. All are increasing policy interest rate.
After taking over the responsibility, Abdur Rouf Talukder said his main task will be to control inflation. After taking over responsibility, Raghuram Rajan talked about the same goal. For this, his main weapon was interest rate. He has described in his book how he has used interest rate to control inflation. The Bangladesh Bank new governor, however, has not said how he will tackle inflation. During the former government, the businessmen fixed the interest rate in meetings at five-star hotels. The new governor has to change that interest rate. The question bigger than whether he would be able to do that, is whether he would be able to shift the policy decisions from the five-star hotels to the board room of Bangladesh Bank.
Maintaining continuity of policies in economy is very important. But the continuity of bad policies must be shunned. Awami League government has been in power since 2009. Late banker Khondkar Ibrahim Khaled, on record, would call this government defaulter-friendly. When Awami League government took over in 2009, at the time default loans totalled Tk 220 billion. Now default loans stand at Tk 1130 billion. The policies adopted in these 14 years are in favour of the loan defaulters. Under various excuses, they have been given all sorts of scope. But the default has not decreased, it has increased. It was expected the new governor would issue a tough signal to the defaulters. But the opposite has happened. After joining as governor, he issued a circular which spared the defaulters hugely. There is a saying 'morning shows the day'. So it seems better to keep all expectations from the governor on hold. The defaulters and influential persons have got their thumbs-up message.
The list of scams in the financial sector of last 14 years is very long. The scams started with the share market, BASIC Bank and Hall Mark in 2009 and 2010. Later, the financial scams expanded in so many directions, this could be a topic of research. The lack of good governance has put the banking sector at risk. As a regulator, Bangladesh Bank is continuously failing to deliver its responsibilities. The central bank has helplessly surrendered to the influential people. The central bank was also backed banks being occupied by companies in actual name and false names. Many certainly remember that the former governor remained in office till late night to approve the takeover of a bank. Two top Bangladesh Bank officials assisted the controversial PK Halder to take money from the financial institutions and to launder it. After changing the law and taking over the new responsibility, Fazle Kabir signed the file first about the recruitment of former Bangladesh Bank deputy governor SK Sur Chowdhury as a director of a bank.
But now taking money from banks is quite open. Money is being transferred even after the vault is opened. Earlier, money has been embezzled by the companies opened in accordance with the rules and regulation. Now companies with mere trade licences are making off with thousands of crores. Bangladesh Bank could not take any tough action despite identifying them.
So the independence of the central bank that Abdur Rouf Talukder has inherited, is in question. There are also various questions about its role. Pakistan CSP officer Nurul Islam was the first bureaucrat governor of Bangladesh Bank. He was in charge for 11 years at a stretch since 1976. He is still now considered as one of the best governors. The future will tell how far the current bureaucrat governor will be successful and enjoy his duties as governor.
Raghuram Rajan also writes, "Some of the actions I take will not be popular. The Governorship of the central bank is not meant to win one votes or Facebook "likes." But I hope to do the right thing, no matter what the criticism, even while looking to learn from the criticism."
Rudyard Kipling's poem 'If' perhaps best describes the criteria of an ideal central bank man:
"If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too."
* Shawkat Hossain is the head of online, Prothom Alo.
*This article, originally published in Prothom Alo print and online editions, has been rewritten in English by Rabiul Islam.