Bonikbarta Exclusive

One of the most pivotal moments in Bangladesh's history was August 15, 1975. Bangabandhu Sheikh Mujibur Rahman was assassinated along with his family in a bloody military coup on that day. Following this tragic event, the ruling party, the Bangladesh Krishak Sramik Awami League, or BaKSAL, was dissolved. During that time, A.K.N. Ahmed served as the Governor of Bangladesh Bank. The Governor, appointed by the Bangabandhu government, served till July 13, 1976. Even after the fall of the government and the abolition of BaKSAL, A.K.N. Ahmed remained in the post of governor for almost a year.

49 years later, on August 5, the government led by Sheikh Hasina, the daughter of Sheikh Mujibur Rahman, was overthrown. Faced with a mass uprising by students and citizens, the ousted Prime Minister fled to India. Abdur Rauf Talukder, the governor appointed by the Awami League government, also went into hiding since that day. Though the bank remained open for three days starting August 6, Talukder never returned to his office. Eventually, from an undisclosed location, the once-powerful Governor submitted his resignation to the Ministry of Finance yesterday.

Abdur Rouf Talukder was appointed as the 12th Governor of the central bank on July 12, 2022. Before this role, he was the Finance Secretary and had a long career in the Ministry of Finance. He was known as a trusted bureaucrat under Prime Minister Sheikh Hasina’s administration.

16 December 1971, the Victory Day, is considered as the foundation day of Bangladesh Bank. Since its inception, 12 Governors have led the central bank. Eight of them were government bureaucrats, while the remaining four were academicians or bankers. A review of the history of those who held the Governor’s office over the past 53 years reveals that Abdur Rouf Talukder is the only one who vanished after a government’s downfall. None of the previous 11 Governors fled or felt compelled to resign after a regime change.

Former Governors, economists, and banking executives have noted that Abdur Rouf Talukder acted more as a partisan operative than as an independent central bank leader. Many of his decisions were politically motivated, and he allegedly played a role in enabling notorious criminals to loot bank funds. This has been cited as the reason he lacked the courage to reappear after the government fell. Not just in Bangladesh, it is questionable whether any central bank Governor in the world has ever fled following a political upheaval.

Economist Dr. Ahsan H. Mansur believes that “During Sheikh Hasina’s 15-year rule, Bangladesh Bank could not operate independently. This has harmed the nation’s economy. Public funds deposited in banks were looted. This lead to growing discontent with the government. Had the central bank been allowed to function independently, it would have ultimately benefited the government.”

Speaking to Bonik Barta, Mansur added, “Previously, non-political individuals were appointed as Governors of Bangladesh Bank. But this position has also been politicized. The fact that the Governor fled after the government’s fall is a disgrace for any country’s central bank.”

The Eighth President of Bangladesh, Ziaur Rahman, was assassinated by members of the military on May 30, 1981. Ten months later, on March 24, 1982, Lieutenant General Hussain Muhammad Ershad seized power through a coup, imposing military rule in the country. Despite the assassination of Ziaur Rahman and the subsequent rise of Ershad, the position of the Governor of Bangladesh Bank remained unchanged. M. Nurul Islam took over as the third Governor on July 13, 1976, and served for an uninterrupted 11 years until April 12, 1987. He is remembered with respect for his role in the development of the banking sector, policy formulation, innovations, and industrial growth. Under his leadership, the introduction of back-to-back letters of credit (LCs) played a crucial role in the expansion of the ready-made garment industry.

From June 1996 to July 2001, the Awami League, led by Sheikh Hasina, was in power. On November 24, 1998, economist and former bureaucrat Dr. Mohammed Farashuddin was appointed as Governor. Even though the Awami League lost the 2001 election, Farashuddin remained in office. The BNP-led coalition government, under Khaleda Zia, assumed power on October 28, 2001.  Dr. Mohammed Farashuddin, after serving his full term, left office on November 22 of that year.

Dr. Salehuddin Ahmed took office as the ninth Governor on May 1, 2005. He served until April 30, 2009. Even though the Awami League returned to power on January 6 of that year, following their victory in the ninth national election, Dr. Salehuddin Ahmed was able to complete his term as Governor despite the political change.

Speaking on the matter, a former Governor of Bangladesh Bank, who requested anonymity, told Bonik Barta, “The central bank of any country is the ultimate refuge of public trust. The Governor's position is also highly respected. I was also appointed by a political government. But I never did anything during my tenure that would force me to flee after a political shift. It is shameful that we now have to hear about Governors going into hiding. The responsibility of the interim government should be to ensure the complete autonomy of the central bank. The Governor's position should also be elevated to a constitutional role.”

Since taking office on July 12, 2022, Abdur Rouf Talukder had pledged to reform the banking sector, control inflation, and address the reserves and dollar crises. However, none of his promises or initiatives have come to fruition in the past two years. Instead, public trust in the banking sector has eroded further, with increased irregularities, corruption, and looting in both public and private banks.

During the announcement of his first monetary policy, Abdur Rouf Talukder had assured that the dollar crisis would be resolved by December 2022 and reserves would start to grow, the exchange rate would be left to market forces, and inflation would be controlled. But two years later, none of these indicators have shown any improvement.

According to data from Bangladesh Bank, the country's gross foreign exchange reserves stood at $41.82 billion on June 30, 2022. As of July 31 of this year, reserves have plummeted to $25.92 billion. However, under international standards (BPM6), the reserves are estimated at $20.48 billion, with usable or net reserves hovering around $15 billion.

When Abdur Rouf Talukder assumed the role of Governor in July 2022, the exchange rate was BDT 93.45 per dollar. Currently, the dollar is trading at BDT 118, while in the curb market (retail market), the rate exceeds BDT 125.

In a press conference on August 4, 2022, shortly after taking office, Abdur Rouf Talukder announced, “Bangladesh Bank has identified 10 weak banks. If they do not improve, they will be merged.”

However, without adequate preparation, Talukder initiated efforts to merge these struggling banks earlier this year. Suddenly, there was an announcement to merge the troubled Padma Bank with EXIM Bank. Then, it was said that the state-run BASIC Bank would be merged with City Bank, and National Bank with United Commercial Bank (UCB). None of these proposals materialized, but the mere prospect of forced mergers sparked panic, leading customers to withdraw their funds. This further exacerbated the liquidity crisis in the banking sector.

To control inflation, the cap on interest rates for loans, which was set at 9 percent, was lifted at the start of the last fiscal year. This caused interest rates of bank loans to surge past 15 percent, yet inflation remained stubbornly high. As recently as the month of June, the average inflation rate in the country stood at 9.73 percent. Inflation has been above 9 percent for the past two years.

Abdur Rouf Talukder also eased rescheduling policies to underreport non-performing loans (NPLs) in the banking sector. Previously, central bank approval was required for rescheduling, but he delegated this authority to the lending banks. As a result, banks rescheduled billions of taka in loans without scrutiny, shielding their owners from default status. Yet, despite these efforts, NPLs continued to rise. At the end of December 2022, NPLs in the banking sector amounted to 1.2 BDT trillion. By March of this year, that figure had surged past BDT 1.82 trillion. Experts now estimate that, including rescheduled, written-off, and anonymous loans, the amount of risky loans could be as high as BDT 6 to 7 trillion.

On the condition of anonymity, a top executive of the country’s first-generation private bank told Bonik Barta, “Abdur Rouf Talukder was excessively arrogant. He always spoke with a sense of superiority. He frequently mistreated bank executives and others in his interactions. But now, all his arrogance has crumbled to dust. It’s disheartening to hear that the governor has fled.”

On September 26, 2023, Bonik Barta published a report highlighting Abdur Rouf Talukder's poor performance. Titled “India’s Governor gets an A Plus, Sri Lanka’s Governor receives an A Minus; BB Governor Abdur Rouf Talukder receives a ‘D’ Grade”. The article noted that Bangladesh Bank’s governor was assigned a ‘D’ grade in the Global Finance magazine’s ranking. The New York-based magazine credited India's central bank governor Shaktikanta Das with an A+ grade for successfully managing inflation and other key indicators. Meanwhile, Sri Lanka’s governor, Nandalal Weerasinghe, earned an A- for guiding the country out of bankruptcy and severe inflation. Even Pakistan’s central bank governor, Jameel Ahmad, received a C- despite the nation’s economic turmoil. Since 1994, Global Finance has graded central bank governors from around the world. The magazine’s annual ‘Central Banker Report Card’ evaluates governors from 101 major countries, with the latest report published in 2023.

Attempts to reach Abdur Rouf Talukder for comment on the matter were unsuccessful, as his cell phone was switched off.

Regarding the acceptance of the governor's resignation, interim government finance advisor Dr. Salehuddin Ahmed stated at the Secretariat yesterday (August 10), “The position of governor is sensitive. He has submitted his resignation letter, and a decision will be made at tomorrow’s (Sunday) meeting. Bangladesh Bank’s laws, or any national laws, are of sufficient international standard. But they are not followed. Those responsible for enforcing such laws did not do so. And those who should have adhered to them also failed.”