Retired economic adviser Salehuddin Ahmed has recently issued a comprehensive set of recommendations aimed at overhauling the nation’s financial sector. Addressed to his successor and the incoming government, the proposals offer detailed guidance on structural reforms designed to enhance transparency, accountability, and stability within the banking system.
At the core of Ahmed’s recommendations is the establishment of an independent regulatory authority. This body would be responsible solely for supervising banks and other financial institutions, operating entirely separately from the central bank’s primary policy-making functions. According to Ahmed, this structural separation would minimise conflicts of interest, strengthen institutional accountability, and reinforce the overall resilience of the financial system.
Currently, the central bank performs dual roles: it formulates monetary policy while simultaneously supervising commercial banks and other financial institutions. Experts have long cautioned that consolidating regulatory and policy-making authority in a single institution can compromise both effectiveness and impartiality.
Ahmed proposes a specialised oversight agency focused exclusively on supervision. This would allow the central bank to concentrate on its core responsibilities, including controlling inflation, implementing financial policies, and maintaining economic stability. He emphasises that, given the country’s relatively large number of banks, separating supervisory functions is essential to reduce the administrative burden on the central bank.
International Comparison of Banking Supervision
| Country | Supervisory Structure |
|---|---|
| United States | Independent regulatory authority effective |
| United Kingdom | Independent regulatory authority effective |
| Japan | Separate supervisory agency exists |
| India | Central bank also supervises banks |
| Philippines | Supervision under central bank |
The recommendations further call for the creation of a bank restructuring authority, a deposit insurance agency, and separate legislation governing Islamic banking. These measures aim to safeguard depositors’ interests, facilitate the recovery of weak banks, and enhance transparency in Sharia-compliant banking operations.
Priorities for Economic Stability
Ahmed has identified several immediate priorities for the government, including:
Increasing revenue collection
Maintaining market-based exchange rates
Focusing on critical development projects
Exercising caution in high-interest borrowing
Restructuring subsidised salary scales and reducing waste
He notes that inflation reached nearly 111 percent over the past decade, making salary restructuring imperative to maintain public servants’ living standards. Ahmed also stresses the importance of integrating fiscal and monetary policies.
Regarding revenue management, he highlights challenges such as tax evasion, excessive exemptions, and inadequate digital infrastructure, recommending technology-driven reforms to enhance fairness, transparency, and accountability in the tax system.
In summary, Ahmed asserts that sustainable economic recovery is impossible without structural reform. His recommendations provide a pragmatic, timely roadmap for the government, offering a long-term framework to support financial stability, economic growth, and institutional resilience.
Salehuddin Ahmed’s proposals represent a cohesive and actionable blueprint for the country’s banking and financial sector reform.