The Centre for Policy Dialogue, arguably the country's leading think-tank on issues related to the economy, has once again set the cat amongst the pigeons, this time asserting the country's banks have been reduced to mere vehicles for 'the financial oligarchy' - a handful of large players exercising control, often discreetly, over a disproportionate number of banks and non-bank financial institutions. This gradual zeroing in on the oligarchs of the financial sector is really the logical evolution of CPD's tracking of the Bangladesh economy over the years, in which an overarching theme has been the gradual yet certain, and consistent, slide into the embrace of crony capitalism. Today it is practically the only game in town.

From beginning to end, the most pernicious effect of such a system we find, is that economic indicators start getting divorced from fundamentals. Like a tear, it grows in an irregular pattern. Policy instruments start losing their potency, more and more transactions are completed under the table, and you can never be too confident of having a stable political environment. Specifically in the banking or financial sectors, beyond bread-and-butter tasks that remain commercially negligible in a bank's overall operations, the most crucial aspects such as loan-giving, their sanction or approval or disbursement, become subject to political decisions. Again, divorced from fundamentals.

The recurrent, in fact frequent, instances of financial fraud are actually growing at astronomical rates, alongside other irregularities. Over the years, various governments at various times have tried to walk the path of reform, but none has proved committed enough to stay the distance, in the final analysis. The stakeholders must be clear in their understanding that the upheaval required is not piecemeal. As Dr Fahmida Khatun, CPD's executive director, underlined this week at a pre-budget seminar with a particular focus on this important but ailing sector (titled 'What Lies Ahead for the Banking Sector in Bangladesh?'), public trust in the banking sector has been 'eroded', due to the continuous deterioration in its health and inadequate measures by policymakers. Since the specific reforms required will face resistance from vested interest groups - inordinately powerful and influential in the lattice of a crony capitalist system - they must be backed by political will.

But we must be realistic and recognise that such a reform initiative is not at all visible in the horizon, indeed it would resemble a pipe dream. The situation at Bangladesh Bank, the banking sector regulator as the country's central bank, alone is enough to blunt any reform initiative for the time being. Although in the chatter among stakeholders for a number of weeks now, Dr Khatun this week during the CPD seminar, went further than anyone has till now, which is to be commended.

The restricted access for journalists to the central bank remains in force, so little information is available on how decisions are actually being taken. The spectacular, and sudden capitulation to IMF prescriptions that were resisted for years, at just a day's notice on May 8 to shift the exchange rate regime and liberalise interest rates, reveals itself more and more as a leap of faith with each passing day, without any projections of the expected impacts. Normally, the central bank would proceed on the basis of at least a white paper for such major policy decisions. We'll leave you with one final observation from the CPD seminar that is probably most pertinent for now, before we move on to any of the larger tasks: it would be difficult to restore good governance in the banking sector, as long as it is missing from the regulatory authority i.e. Bangladesh Bank itself.