President Recep Tayyip Erdoğan, on June 3, named the former economy minister, Şimşek, as the treasury and finance minister to replace Nureddin Nebati.
Establishing macro-financial stability will be the government’s priority, newly appointed Treasury and Finance Minister Mehmet Şimşek has said, stressing that bringing down inflation to single digits in the medium term is crucial.
“For sustainable development, establishing fiscal and price discipline will be our main priority,” Şimsek said at a ceremony on June 4 in the capital Ankara, where he took over the post from Nebati.
Turkey has no other choice but to return to rational policy grounds, with a rule-based, predictable economy being the key to achieving the desired prosperity, Şimşek added.
“Our main aim is to boost social welfare. Transparency, consistency, predictability and compliance with international norms will be our basic principles in achieving this goal,” Şimşek said.
It is urgent for Turkey, in the medium-term, to bring down inflation to single digits, to increase predictability and to ramp up institutional transformation, which will help reduce the current account deficit, Şimsek said.
“We will prioritize macro-financial stability by strengthening the institutional quality and capacity at a time when global challenges and geopolitical tensions heighten,” he added.
He also heralded work on a new Medium Term Economic Program.
“Şimşek will be treading a very fine line,” said Aura Sabadus, a researcher at the Center for European Policy Analysis.
“His appointment is good news for markets, but it’s worth remembering Erdoğan has already fired two deputy central bank governors who opposed his unorthodox views on the economy,” Sabadus said.
Those competing visions could spell more trouble ahead, said Karabekir Akkoyunlu, a lecturer at London’s School of Oriental and African Studies.
“Şimşek said Turkey has no choice but to go back to rational grounds, but that begs the question of why it was irrational previously,” he said.
Erdoğan’s big-spending giveaways, like offering households free gas and increases in public sector salaries, could soon give way to efforts to balance the books, Akkoyunlu added. “With the election out of the way, the ‘campaign economy’ is over. Şimşek will press on with austerity”, according to Politico.
Simsek’s statement implies former economic policy, labeld the New Economy Model was not rational. Rationality would mean fighting inflation with tight monetary policy, an approach both Erdogan and the outgoing economy czar Nurettin Nebati firmly rejected. Simsek might have been given leeway to experiment with orthodox monetary policy for the time being, at least until Erdogan wins March 2024 local elections. For Simsek’s promise to be credible, the mastermind of the implicit exchange rate peg and a complex web of financial regulations amounting to severe financial repression, Central Bank governor Sahap Kavcioglu must be sacked and replaced with a name who can cooperate with Simsek.
Simsek is already making enemies. The opposition accuse him of being the friend of London money merchants and the co-architect of the hot money friendly policies. The leading advocate of the New Economy Model, former economy minister and Erdogan’s son in law, Berat, representing the powerful Albayrak family has also openly rebelled against him.
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