President Recep Tayyip Erdogan of Turkey has appointed a new governor for the country’s central bank. This decision came shortly after Hafize Gaye Erkan, the first woman to ever hold the position and the fifth governor in just five years, announced her resignation on February 2. Erkan cited a significant campaign aimed at tarnishing her reputation as the reason for her departure. Fatih Karahan, previously the deputy governor, has been promptly elevated to the top position.
According to a report by Ben Hubbard for The New York Times (NYT), Erkan’s resignation occurs amidst Turkey’s ongoing struggle with a severe cost-of-living crisis, with the nation grappling with an annual inflation rate of approximately 65 percent as of last month. Despite the abrupt leadership change, senior officials have been quick to assure investors that there will be no deviation from the current economic policies.
Mehmet Simsek, Turkey’s Finance Minister, characterized Erkan’s resignation as a personal choice, praising her successor, Karahan, as a macroeconomist of high repute with extensive knowledge and expertise. Both Simsek and Vice President Cevdet Yilmaz reaffirmed President Erdogan’s support for the economic team and its strategies.
This leadership transition follows a period of economic policy adjustments initiated by Erdogan, who, since 2018, had advocated for lowering interest rates despite the tumbling value of Turkey’s currency and surging inflation. This approach, counter to traditional economic wisdom, was adjusted with the appointments of Erkan and Simsek, signaling a return to more orthodox economic policies, including significant interest rate hikes.
Fatih Karahan, the new central bank chief, brings a wealth of experience to the role, with a doctorate in economics from the University of Pennsylvania and teaching stints at Columbia University and New York University. His resume also includes a role as an economist for Amazon. Karahan has been a part of the bank’s interest rate-setting committee since July.
Erkan’s tenure was initially met with optimism, given her background in the U.S. financial sector, including roles at Goldman Sachs and First Republic Bank, suggesting a conventional approach to monetary policy. However, her term was marred by controversies, including allegations of undue influence by her father, which the bank denied.
In a heartfelt statement shared on social media media platform X, Erkan expressed her dedication to her role and the sacrifices made for her country. She highlighted the economic program’s initial successes, including improvements in reserves and inflation indicators, as evidence of her effective leadership. Despite these achievements, Erkan decided to step down to protect her family from the ongoing smear campaign, expressing gratitude to her colleagues, the Minister of Treasury and Finance, and President Erdogan for their support during her tenure.
Erkan’s departure and Karahan’s appointment come at a critical juncture for Turkey’s economy as the country seeks to navigate through its financial challenges and restore stability and confidence in its economic policies.
Turkey is emerging as a prominent global leader in cryptocurrency adoption, with estimations indicating that approximately 10% of its populace, equivalent to around 8 million individuals, actively engage in the digital asset investment sphere. This widespread acceptance of cryptocurrencies can be attributed to a distinct interplay of factors.
First and foremost, the continuous devaluation of the Turkish Lira has spurred a quest for alternative means of preserving wealth. Given the erosion of their purchasing power due to inflation, many citizens view cryptocurrencies as a potential refuge for safeguarding their savings. Secondly, Turkey boasts a youthful and tech-savvy population enthusiastic about exploring novel financial technologies. This openness to online platforms and digital solutions has created fertile ground for the adoption of cryptocurrencies. Furthermore, local cryptocurrency exchanges such as BtcTurk and Paribu have significantly simplified the process of buying and selling digital currencies for Turkish residents, further propelling its popularity.
While the appeal of cryptocurrencies lies in their perceived capacity to hedge against inflation and provide avenues for financial growth, it is imperative to recognize the inherent volatility associated with these digital assets. Additionally, the regulatory framework surrounding cryptocurrency in Turkey remains somewhat ambiguous, although the government is actively investigating potential regulatory frameworks for its future.
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