Turkey has a new central bank chief. Erdogan relies on experienced American financial expert Hafize Gaye Erkan. In the midst of an economic crisis, it must now change the direction of fiscal policy.
The Turkish central bank has a new boss: Erdogan has appointed US finance manager Hafize Gaye Erkan. The official appointment of the former Co-CEO of First Republic Bank and Managing Director of Goldman Sachs was published today in the Official Gazette.
Experienced Financial Specialist
Erkan takes office just under a week after Erdogan signaled a move away from unconventional fiscal policy with a new cabinet.
Its only task is to change course and restructure fiscal policy after years of interest rate cuts and an ongoing economic crisis.
As the fifth central bank chief in four years, she replaces Sahap Kavcioglu. He spearheaded Erdogan’s rate-cut policy and has now been named head of state banking regulator BDDK.
Moving away from unconventional financial policies?
Turkey’s past fiscal policy has deviated from general patterns by lowering interest rates rather than raising them to fight inflation, despite extremely high inflation.
This course was largely driven by President Erdogan, who describes himself as an “enemy of interests” and wants to boost the economy with cheap money. As a result, the national currency, the lira, sharply depreciated, which in turn exacerbated the inflation problem.
Turkey has to import a lot of goods and raw materials, which are becoming more expensive due to the weak lira. Experts have warned that the economy is on the verge of turmoil if current policies continue as its foreign exchange reserves run out.
New business team to regain trust
Overall, the Turkish president wants to regain confidence in financial markets with a new economic team. He recently appointed the internationally renowned expert Mehmet Simsek as Minister of Finance in the new cabinet. Cevdet Yilmaz was appointed vice president – he is also considered a representative of traditional economic policy.
Erdogan, who has been in power for 20 years, was recently sworn in for another term. The 69-year-old politician, who trailed partially in the polls, won 52.2% of the vote in the second round.