What Turkey’s new Central Bank chief means for the economy
In a first for Turkey, an Islamic finance professional has been named Central Bank governor amid questions of whether the appointment is linked to Erdogan’s war on interest rates.
Recep Tayyip Erdogan’s war on interest rates began immediately after his Justice and Development Party (AKP) came to power in 2002. Flouting the conventional economic theory, the Turkish leader advanced his own theory with the unusual argument that high inflation is the product of high interest rates. As a result, he has often clashed with Central Bank governors, incensed that they kept interest rates too high.
For Erdogan, the “merciless” interest rate system is “the biggest weapon of colonialism,” while his political opponents are an “interest-rate lobby” greedy for higher rates. Thus, he believes, interest-free Islamic banking should be strengthened and expanded. Fourteen years into office, Erdogan may have finally found the perfect Central Bank chief to put his rebellious economic vision into practice.
On April 11, Turkey’s Central Bank got its first governor with an Islamic finance background, Murat Cetinkaya, as a replacement to the outgoing Erdem Basci. For the past four years, Cetinkaya served as the bank’s deputy governor, a post he assumed after a career with Islamic banks such as Albaraka Turk and Kuveyt Turk.
The biggest question in Turkey now is whether or not this appointment reflects Erdogan’s Islamist-inspired economic vision, which many have come to call Erdoganomics. The answer is not easy, for both Cetinkaya and his economic views are a mystery to the public.
