Dhaka, Jan. 6 -- The issue of central bank independence has two elements. First- governance, how is the central bank governed? Are its leadership appointments merit-based? Are its internal decisions insulated from day-to-day political interference? The prevailing wisdom around the world is that management systems for central banks must remain fairly independent from general government administration. The appointment of the governor, deputy governors, and senior economists must follow a clear, preferably legal or statutory, framework. The internal management of the bank and its regulation of commercial banks must be transparent and robust, and free from outside interference.

Second- functional independence, what does the central bank do? ...