Turkish court rules president cannot sack central bank chief

Vasilis Ververidis/Alamy via Reuters

• Ruling comes after five firings
• Government officials play down impact
• Case bought by opposition party

A ruling by Turkey’s highest court striking down the president’s authority to dismiss the head of the central bank is being downplayed by Turkish officials.

President Recep Tayyip Erdoğan has sacked the governor of the central bank five times in the past five years. Turkey’s justice minister has insisted the Constitutional Court’s decision did not invalidate previous presidential decrees or appointments.

On June 4, the Constitutional Court ruled that a decree allowing the president to remove a governor or deputy governor of the central bank was unconstitutional and in breach of the bank’s independence from the executive arm of government. 

---

---

In its ruling, the court said that legislation was required to give Erdoğan the power to remove senior central bank officials, and that a decree he issued in 2018 did not have the necessary standing under law.

It has taken six years for a decision to be handed down in the case, which had been brought to the Constitutional Court by Turkey’s main opposition, the Republican People’s Party (CHP) soon after the 2018 presidential decree was issued.

The CHP had argued that having the right to remove the central bank governor gave the government excessive control over fiscal and interest rate policy by weakening the position of the bank head.

However, the Constitutional Court, while finding in favour of the CHP’s petition, also ruled that no immediate action be taken. This granted the government a 12-month window in which to amend regulations covering the dismissal of the bank governor.

• Turkey names new central bank governor

• Erdogan names ex-Goldman Sachs MD to head central bank

• Turkey’s central bank aims for disinflation in H2 2024 

The ruling also does not affect the president’s right to appoint the head of the reserve when the position falls vacant. 

For many years Erdoğan claimed that high interest rates were the cause, not the cure, of rising inflation. The central bank reduced rates to 8.5 percent in February 2023, from 19 percent in 2021. These accelerated a long-term decline in the lira and sent inflation soaring.

After his re-election in May 2023, the president changed strategy and the central bank raised the benchmark rate to a 22-year peak of 50 percent. Annual inflation nevertheless hit a 19-month high of 75 percent in May.

Justice Minister Yılmaz Tunç, speaking after the court’s decision was announced, said the ruling merely highlighted a gap in state authority that needed to be bridged by legislation. 

Rights restored

The gap was created by the government itself, according to a constitutional scholar at Marmara University in Istanbul, Professor Osman Can, when the governmental system changed from a parliamentary to a presidential model in 2018.

“When Turkey changed its governing model, it needed to harmonise its laws according to the new system,” Can told AGBI. “The president was given the right to issue decrees, but this was seen as an opportunity and a way to bypass parliament in the law-making process.”

The constitutional court ruling, while not representing a seismic shift, has restored some fundamental rights and will reinforce the role of parliament, Can said.

Turkey is still trying to rebuild its economy after the impact of a devastating earthquake that hit the country in February last year. It killed an estimated 48,000 people and rendered hundreds of thousands homeless.

Real GDP will expand 2.4 percent in 2024, S&P Global forecasts. That’s down from 4.5 percent last year and the smallest increase since 2020.

That slower growth will continue to drag the economy down. Public debt will be equal to 20 percent of GDP in 2024, S&P added. Interest payments as a proportion of government revenue will be 17 percent in 2024, up from 13 percent last year.