Turkish court challenges president over governor dismissals

Presidential adviser says Erdoğan will still be able to sack governors

Recep Tayyip Erdogan
Turkish president Recep Tayyip Erdoğan
Photo: President.gov.ua/Wikipedia https://rb.gy/cjuqzp

Turkey’s constitutional court has struck down parts of a 2018 decree by president Recep Tayyip Erdoğan which gave him the power to dismiss central bank governors.

The judges in the country’s highest court gave the ruling on June 4 in response to a lawsuit from the opposition Republican People’s Party. Erdoğan has not yet publicly commented on the court’s decision and it is unclear whether he will feel constrained by it. 

Presidential adviser Mehmet Uçum said the ruling would not remove the president’s power to remove central bank governors, the Financial Times reported. Erdoğan dismissed five governors of the Central Bank of the Republic of Turkey between July 2019 and February this year.

He fired Murat Çetinkaya, Murat Uysal and Naci Ağbal after they refused to keep policy rates low despite rising inflation and a weakening currency. Erdoğan gave several strongly worded speeches denouncing those who backed tighter monetary policy, saying that higher interest rates fuelled inflation. He also dismissed several members of the central bank’s monetary policy committee.

Well-informed sources said the government also dismissed a large number of middle-ranking officials, but the central bank refused to comment on this. The government also dismissed three leaders of the official statistical agency and a large number of senior officials there.

Erdoğan replaced Ağbal as governor with Şahap Kavcıoğlu, who did not raise rates even as inflation rose steeply. After the 2023 election, he appointed Mehmet Şimşek as finance minister and Hafize Gaye Erkan as central bank governor.

The two new officials promised a return to orthodox monetary policy and the central bank raised rates several times. But Erdoğan dismissed Erkan in February after a series of newspaper articles accused her and her father of mismanaging the central bank.

The president then appointed Fatih Karahan to lead the central bank, with the new governor promising that he would continue to fight inflation. Under Karahan, the monetary policy committee has hiked rates once by 500 basis points to 50%.

But it held rates at two subsequent meetings in April and May, despite official inflation continuing to rise. The official inflation rate reached 75% year-on-year in May, according to figures published on June 3.

Finance minister Şimşek said that he expects this to represent inflation’s peak. But some economists have cast doubt on whether the official figures accurately reflect Turkey’s real rate of inflation. Ena-Grup, run by Veysel Ulusoy, an academic economist, estimates that inflation is currently running at 120% year-on-year. 

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