Jul 10 2019

Erdoğan explains bank chief’s sacking, bemoans lack of accountability

Turkish President Recep Tayyip Erdoğan said he was forced to sack Central Bank Governor Murat Çetinkaya at the weekend because his historical lack of accountability brought heavy costs.

Erdoğan said he couldn’t take it any longer, so he met with Treasury and Finance Minister Berat Albayrak and other officials and decided to fire Çetinkaya. He appointed deputy governor Murat Uysal in his place.

“We believed it would be useful to make a change and now we have installed a friend who was deputy governor and who is not a stranger,” Erdoğan said, local media including the Sabah newspaper reported on Wednesday.

“We have employed someone who was in the industry, who is in the finance industry.”

Erdoğan repeatedly clashed with Çetinkaya, most notably at the height of a currency crisis last year when the investors were calling on the central bank to hike interest rates to protect the lira and deal with surging inflation. Erdoğan maintains that higher interest rates cause faster inflation in contradiction to commonly-held economic theory.

The president said he used his rights as president to sack Çetinkaya after years of lack of accountability at the central bank. He made the comments on his plane while returning from a trip to Sarajevo, Sabah said.

Erdoğan issued a decree following the introduction of an enhanced presidential system last July that allowed him to hire and fire senior central bank managers. Central bank independence was guaranteed in law as part of the conditions of Turkey signing a rescue deal with the International Monetary Fund following a financial crisis in 2001.

The lira slid more than 2 percent on Monday due to Çetinkaya's dismissal. On Wednesday, it dropped 0.2 percent to 5.74 per dollar as of 12:33 a.m. local time in istanbul. The lira lost 28 percent of its value last year and has fallen a further 8 percent in 2019.

 Çetinkaya had kept interest rates at 24 percent since raising them in September to help ensure lira stability and to tackle inflation. Annual price increases have slowed to 15.7 percent as of June from 25.2 percent in October, the highest level in a decade and a half.

Erdoğan had called for lower interest rates again this year, ahead of nationwide local elections. His governing Justice and Development Party (AKP) then lost control of Istanbul and the capital Ankara, with opinion polls showing that some AKP voters withdrew their support due to economic difficulties.

Some economists had said that the government should replace Çetinkaya, stating that he was influenced by Erdoğan’s stance on interest rates. But they called for the installation of a known and respected figure who could assert the central bank’s independence.