Turkish officials say there will be no change in Central Bank’s independence

ANKARA

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There will be no change in the independent status of Turkey’s Central Bank, according to Deputy Prime Minister Mehmet Şimşek, after the Turkish Lira eased on concerns about a new government program.

The government program unveiled in parliament late on Nov. 25 said the Central Bank would continue to determine monetary policy instruments directly itself as the basis for securing price stability, but the document omitted a previous reference to the Central Bank setting monetary policy independently.

Şimşek, who is in charge of the country’s economic administration, said the Central Bank will continue to use monetary policy instruments independently to accomplish its mandate of ensuring price stability, in a tweeted comment on early Nov. 26. 

“The main duty of the Central Bank is to ensure price stability. It will continue to independently employ monetary policy tools,” he said.      

The lira weakened to 2.90 against the dollar by early Nov. 26 from 2.88 late on Nov. 25 under additional pressure from strained Turkish-Russian ties, although it recovered slightly after Şimşek’s comments. 

The independence of Turkey’s Central Bank, an important prerequisite in the harmonization process with European norms, will also be the closing benchmark in EU accession talks when Chapter 17 is opened on Dec. 15, European officials told Hürriyet Daily News. 

New economic program 

Turkey’s new government will aim to bring inflation down to single digits while maintaining the Central Bank’s independence and ensuring its fiscal discipline, Prime Minister Ahmet Davutoğlu said on Nov. 25, as he revealed a “market-friendly program designed to lure back investors.”

In a bid to decrease the current account deficit, a number of new regulations will be issued to raise savings, said Davutoğlu. In this vein, a detailed study will be made to enable the state to take rents (unearned revenues) from properties. The tax exemptions over the loans for immovable properties will be reconsidered and new taxes will be applied on luxury products and imported high-end products.    

The government has said it will focus on macroeconomic stability, as well as microeconomic and structural reforms, said Davutoğlu. 

The public procurement law will be reformed to enhance transparency and raise competitiveness, he noted, adding that new procurement laws will be issued for electricity, natural gas and water industries. The residence permit procedures for qualified foreign people and their families will be eased, according to the new program. 

The government will try to accelerate industrialization and bolster manufacturing output, while creating new financing tools and budget income, he noted. 

In this vein, a mechanism to coordinate Islamic financing activities and a set of ethical codes and corporate governance principles will be designed in this field. In urban transformation projects, new financing tools will be used, such as sukuk. 

The government has also vowed to keep its election promises through the new economic program, such as proposing the revision of the minimum wage up to 1,300 liras to the related commission. 

It has also pledged to continue its “huge projects,” such as the implementation of the planned Canal Istanbul project and the construction of the country’s third nuclear power plant. 

The allocation of green land in urban areas will increase to 15 square meters per capita from 10 square meters, according to the new economic program.