In a significant structural reform aimed at reinforcing the independence of monetary policy, the government has initiated a plan to detach treasury operations from the Bangladesh Bank (BB). The move is being widely viewed as an attempt to shield the central bank’s monetary functions from fiscal pressures that often restrict its ability to act freely and effectively.
This reform proposal follows strong recommendations from both the International Monetary Fund (IMF) and the World Bank (WB). According to these global lenders, the blending of treasury functions with monetary operations has long hindered accurate and timely transmission of monetary policy in Bangladesh. They observed that in many advanced as well as emerging economies, these activities are kept functionally separate to avoid conflicts of interest and ensure smoother policy execution.
At present, the Debt Management Department of Bangladesh Bank manages the domestic borrowing of the government on behalf of the Ministry of Finance by arranging auctions of government securities (G-Sec), including treasury bills and bonds. This arrangement exists largely because no dedicated government unit has been responsible for conducting such auctions.
Under the new plan, a fully operational Debt Management Office (DMO) will soon be established under the Ministry of Finance. Its responsibilities will include conducting auctions of treasury bills and bonds, raising funds to fill budget deficits, and gradually assuming all treasury-related functions currently performed by the central bank.
The Treasury and Debt Management (TDM) Wing of the ministry has already begun discussions with relevant central bank officials to ensure a smooth transition. A senior ministry official noted that although the separation will be gradual, the process is expected to bring clarity and stability to the country’s financial governance.
In the initial phase, the Bangladesh Bank’s Debt Management Department will continue to manage the G-Sec auctions but under direct guidance from the ministry. All decisions—including auction schedules, volumes, and targeted yields—will be finalised in consultation with the central bank to avoid market disruption.
“Ultimately, the ministry will determine the yield levels and the amount to be raised through each instrument,” the official confirmed. He added that the new DMO, once established under an additional secretary, will recruit skilled professionals to make the office fully functional. Experienced central bank officials may initially be deputed to ensure continuity until the ministry forms its own capable team.
A Bangladesh Bank official, requesting anonymity, acknowledged that separating treasury operations from the central bank is crucial for ensuring independent monetary policy transmission. He emphasised that persistent fiscal dominance often weakens the effectiveness of monetary decisions, and expressed optimism that the reform would strengthen Bangladesh’s financial architecture if executed properly.