From right: the former governor of the Turkish Central Bank, Hafiza Ghaya Arkan, and the new governor, Fatih Karahan (agencies)

Istanbul -

The Governor of the Turkish Central Bank, Hafiza Ghaya Arkan, announced yesterday, Friday, her resignation from her position, only 8 months after assuming the helm of its presidency, in a step that was not a surprise to the Turkish economic arena, preceded by her announcement of the official decision of the Turkish presidency, which took a different turn, as it referred to the dismissal of... Erkan, instead of simply accepting her resignation, also appointed her deputy, Fatih Karahan, as the new governor of the Central Bank.

In her tweet on the “X” platform, Arkan said that her decision came with the aim of sparing her family and her child, who is under one and a half years old, from being further affected by a campaign launched against her with the aim of damaging her reputation.

Last month, Turkish media reported that an employee of the Central Bank had filed a complaint with the Communications Center of the Presidency of the Republic, accusing Hafiza Arkan of giving her father broad powers within the bank, amounting to interference in the procedures for appointing and dismissing employees, in addition to exploiting the bank’s facilities and resorts for her family use. Which caused a widespread uproar on social media platforms.

Al Jazeera Net then contacted the Turkish Presidency's call center to inquire about the truth of the information, but they in turn refused to comment on the issue, denying or confirming.

Some local newspapers at the time also reported that the President of the Turkish Republic was upset by statements made by former Central Bank Governor Arkan, in which she criticized the high rent prices and high prices in the city of Istanbul, which prompted her to move to live with her mother, after she was unable to find a house at a suitable price.

Who is the new central bank governor?

Fatih Karahan, who will hold his first meeting on February 8, was born in Eskişehir in 1982. He combined distinguished academic and professional experience. After graduating from Boğaziçi University in the Department of Mathematics and Industrial Engineering in 2006, he completed his graduate studies in economics at the University of Pennsylvania in The United States, where he obtained his master’s and doctorate in 2012.

Karahan began his career at the Federal Reserve Bank of New York, and held senior positions at the bank until 2022 before joining Amazon as an economist and then being appointed chief economist in November of the same year.

In July 2023, Karahan moved to a new role as Deputy Governor of the Central Bank of Turkey, adding a new dimension to his diverse career.

The repercussions of the resignation on the economy

The Turkish lira was shaken after the announcement of the resignation of the Central Bank Governor, with the dollar recording about 30.5 Turkish liras, but the Turkish President’s appointment of her deputy, Fatih Karahan, came as a quick response to calm the financial markets.

The comment of the Turkish Minister of Finance and Treasury, Mehmet Simsek, on the resignation also played an important role in reassuring the markets and investors, as he stressed that the decision taken by Hafiza Ghaya Arkan is a completely personal decision and according to her own discretion, and he also stressed his intention to advance steadily towards the goal of price stability from Through strong cooperation and coordination as a team.

The American bank, JP Morgan, issued a positive assessment report on the recent changes in the leadership of the Turkish Central Bank, as the report expected a tightening of monetary policy with the leadership of Karahan, whom it considered one of the “defenders” of strict monetary policies, which enhances hopes for reducing inflation and improving the value of the lira. Turkish.

Central Bank of Turkey (Al Jazeera)

The report also indicated that monetary policy will be more focused on combating inflation, which means keeping interest rates high for a longer period, indicating that uncertainty about the term of office of central bank presidents remains a factor of concern to investors.

For his part, economic researcher Muhammad Abu Alyan says that the failure of the central bank governor to remain governor for a long period - not less than 5 years - is an indication of the lack of independence of the central bank and its monetary policy, which negatively affects economic stability and reflects a negative image abroad.

Abu Alyan did not consider the resignation of the previous governor after a media campaign directed against her family as a surprise, and he expected that its impact on the lira and monetary policy would be limited, until the policy path that the new governor will follow becomes clear, who is not expected to make major changes, especially since the Turkish Minister of Finance and Treasury Mehmet Simsek was the one who suggested his appointment.

This indicates that Simsek has a significant influence in directing economic policies, whether fiscal or monetary, which indicates the continuity of the current economic policy that is in line with the goals of the medium-term plan announced in December 2023.

For his part, economic researcher, Jahid Kabji, considered the anxiety surrounding the dismissal of the Central Bank governor exaggerated, noting that the markets responded positively to this change.

Speaking to Al Jazeera Net, he confirmed that the rumors that targeted Arkan represented a threat to the credibility of the institution, which made her dismissal necessary and useful, according to his description.

Tasks await the new governor

Abu Alyan expected that the new administration of the Central Bank would face major challenges in confronting high inflation and maintaining the stability of the value of the Turkish lira, in addition to seeking to enhance confidence in the local currency by encouraging savings in it, and trying to move away from excessive reliance on “dollarization.”

He also pointed out that the new governor will have the task of reducing inflation at a time when he will be forced to reduce the interest rate reasonably to satisfy the policies followed by the Turkish President, seeking to reconcile the need for effective monetary policies with the expectations of political parties.

Presidents of the Turkish Central Bank

  • Hafida Ghaya Arkan resigned on February 2, 2023

  • Shihab Cavoğlu, dismissed on June 9, 2023

  • Naji Agbal, dismissed on March 20, 2021

  • Murat Uysal, dismissed on November 7, 2020

  • Murat Çetin Kaya, dismissed on July 6, 2019

Source: Al Jazeera