Turkey’s opposition vows to ensure Central Bank independence

Turkey’s opposition block formed by the six opposition parties vowed to ensure independent monetary management in the event that they came to power in a new report announced on June 13.

“The Institutional Reforms Commission” established by the six-party opposition block finished its first report which focused on the block’s reform propositions to be implemented in the financial and monetary management of the Turkish economy.

The block vowed to strengthen the structure of the Central Bank to ensure its independence, and build new institutions such as the “Damage Assessment Committee” and “Strategy and Planning Organization” to “rebuild Turkish economic management”.

Turkish opposition parties CHP, DEVA, İYİ Party, Saadet Partisi, Democrat Party and Gelecek Partisi have formed an alliance ahead of the 2023 elections against President Tayyip Erdoğan’s 20-year Justice and Development Party (AKP) rule. Preferred to be called “Turkiye Table” the alliance is usually referred to as “Table of Six”.

Criticizing the Presidential Government System shift that Turkey has gone through after the 2017 referendum for creating a “one-man regime” the parties gathered around a table in February with a promise to ensure a system shift into a “Strengthened Parliamentary System”.

The table of six held four meetings since it announced its draft constitution in February, however, has been attracting criticisms for not putting forward their political program. Addressing the criticisms, the table has formed the commission to prepare reports that would reflect the table’s future road map and principles. The first Institutional Reforms Commission Report was published on June 13 with a special focus on the block’s economic policy.

Central Bank’s independence

The report has put special weight on the independence of the monetary policy management, and the Central Bank’s autonomy. The table of six vowed to implement reforms to “Strengthen the institutional structure of the Central Bank’s and secure its independence.”

Within this target, the report emphasized that the Central Bank should continue to work as an “independent institution” within the framework of the inflation target and exchange rate regime determined together with the government in order to reduce inflation to single digits permanently. In order to achieve this, the main task of the Central Bank will be to ensure price stability, and the bank “will not be burdened with any responsibilities other than price and financial stability.”

Legislative changes regarding the Central Bank will be made in the Grand National Assembly of Turkey, and the senior management will be appointed for 5 years. The Chairman and Monetary Policy Committee (MPC) members can be appointed a maximum of two times, and it will not be possible to dismiss them with a regulation other than the CBRT law, by clearly stating the circumstances of the dismissal.

In addition, “The CBRT’s accountability that comes with instrument independence will be implemented in a way that covers all layers of society, and the transparency of decision-making processes will be increased,” the report read.

Due Diligence Committee

According to the report, if the election is won, the “Turkiye Desk”, will first establish a “Damage Assessment Committee” which will have full authority to request data and information from institutions. It will report its assessment to the public to the President.

“The irregularities and illegal situations determined during the investigations of the committee will provide important input for the work of the Turkish Court of Accounts, Parliamentary Corruption Investigation Commission, and the State Audit Board, which will be tasked with investigating corruption,” the report read.

The 6-point table also promised to make changes regarding the Economic and Social Council. It was emphasized that the council has not held a meeting since 2009 and that it has become “dysfunctional” with the Presidential system shift.

Criticizing the economy management of being “unaccountable, not based on data and analysis, far from inter-institutional cooperation,” opposition also proposed establishing a “Strategy and Planning Organization”. This organization will first work under the President of the Republic and after the transition to the parliamentary system, it will work under the Prime Minister.

Current Account Deficit, CDC: Economy rings alarm bells

The cost of insurance against the Turkish government’s default over the next five years has soared, hitting the highest closing level in almost two decades. Turkey’s 5-year Credit Default Swap (CDS) or Credit Risk Premium/Credit Default Swap scores rose to 870 basis points on Monday. With this increase, Turkey’s risk has risen above the level reached in the 2008 crisis and 2003 when Erdoğan was prime minister.

According to the Central Bank’s balance of payments statement, the current account deficit increased by $1.22 billion to $2.74 billion in April. The 12-month current account deficit rises to $25.7 billion. The foreign trade deficit, on the other hand, increased by $2.69 billion and rose to $4.43 billion.

Turkish inflation keeps soaring as in May calculations suggest a 73 percent annual rise in Consumer Price Index to its 20-year high. President Erdoğan’s insistence on keeping the policy rates low to boost the export-led growth raises questions about the Central Bank’s independence since it keeps the rates low.

Meanwhile, the independent academic group ENAGroup has been calculating inflation with a daily price index, and they indicate a much more dramatic rise in inflation. The group recently calculated in May that the annual CPI, they call it E-CPI to emphasize their calculation, rose by 160 percent. The groups leading academic faced a disciplinary inquiry from his university.