Turkish president assigns ‘hawk’ to governor position

The Central Bank of the Republic of Turkey (CBRT) has been left in an uncertain state after the governor, Hafize Gaye Erkan, announced her resignation. Erkan’s reign at the helm of the bank was short-lived, extending just for slightly over six months. A deputy at the central bank, Fatih Karahan, is set to ascend into the role vacated by Erkan.

Erkan’s abrupt departure was announced on January 2. While details regarding the exact circumstances leading up to the unexpected resignation are scarce, Erkan revealed that she felt compelled to leave due to what she termed as a smear campaign. Although she refrained from divulging comprehensive details of the ordeal, Erkan’s abrupt resignation highlights the susceptibility of Turkey’s central bank to political interference and raises more questions than it answers.

Interestingly, Erkan is not the only central bank governor whose tenure was cut short under controversial circumstances. The Turkish president, Recep Tayyip Erdoğan, has been known to display a somewhat dismissive attitude towards central bank governors, and this move seems to continue the pattern.

Replacing Erkan in the role of the governor of CBRT is Fatih Karahan. The Turkish president selected Karahan, who had served as a CBRT deputy governor since July of the previous year for the high-profile position. Karahan’s appointment marks a swift rise to power as it is less than a year since he held a deputy governor role.

As he assumes the role of a central bank governor, Karahan nonetheless inherits a complex situation. Amidst rising global economic uncertainty and with the central bank’s credibility somewhat undermined by the recent events, Karahan faces the critical task of assuring investors and other stakeholders that he can take decisive measures to restore stability and safeguard the bank’s integrity.

Yet, as Karahan commences his tenure at CBRT, various stakeholders will be watching closely. Not just for signs of his ability to navigate the intricate economic landscape and overcome the adversities left by his predecessor, but also his capacity to stand his ground in the face of any potential political intervention that may rear its head during his tenure.

This recent saga is just the latest chapter in the ongoing complex relationship between the central bank and the political system in Turkey. It serves as a stark reminder of the potentially disruptive impact that political interference can have on the economy. For now, many await to see how Karahan will navigate the turbulent waters and perform his duties, as he assumes the headship of the Turkish central bank.