Turkey removes clause on five-year term for central bank governor

Turkey yesterday removed a clause that stipulated a five-year term for the central bank governor, making the changes in an emergency decree published shortly before President Tayyip Erdogan took oath for his new presidential term. The decree, published in the government’s Official Gazette, removed a clause that had stated: “The governor is appointed by a cabinet decision for a term of five years. (The governor) can be re-appointed at the end of this period”.

A requirement that deputy central bank governors need at least 10 years of work experience in their field was also scrapped, as was a requirement that they be proposed by the governor. The decree did not state an alternative term length or re-appointment process for the central bank governor, or new requirements for deputy governors would be. Turkey shifts to an all-powerful executive presidency yesterday, ending its decades-long parliamentary democracy and Erdogan will serve as its first president, after winning more than 52% of votes in June 24 elections.

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Traffic moves past the central bank of Turkey in Ankara (file). A requirement that deputy central bank governors need at least 10 years of work experience in their field was also scrapped yesterday, as was a requirement that they be proposed by the governor.

Investors have long been concerned over central bank independence in Turkey. Erdogan’s cabinet, which was due to be announced later yesterday, will be closely watched for any hints over the direction of future economic and monetary policy. In May, Erdogan said he would exercise greater control over monetary policy once re-elected, which sent the lira tumbling to a record low of 4.9290 against the dollar.

Erdogan, a self-described “enemy of interest rates”, wants to see lower borrowing costs to fuel credit and economic growth. Investors, who are worried about double-digit inflation, want to see decisive rate increases.

Sources and photo-credits: Reuters, Gulf Times