Ratings agency Moody’s highlighted concern about the independence of the Turkish Central Bank on July 12, saying that further challenges to its effectiveness would be negative for Turkey’s sovereign rating.
In a note to clients, Moody’s said changes to the governance of the Central Bank suggested its resolve to tighten monetary policy could weaken in the coming months.
Among other things, the announced changes shorten the term of the governor from a minimum of five years to an indicative four years, remove the requirement for deputy governors to have a minimum of 10 years of professional experience and placed the decision-making in the president’s hands, who has become the sole responsible for appointing the governor, deputy governor and other members of the country’s Monetary Policy Committee.
This week President Recep Tayyip Erdoğan appointed his son-in-law and former Energy Minister Berat Albayrak as the country’s treasury and finance minister, hours after being sworn in to a newly strengthened executive presidency.
“It is the further challenges to the effectiveness of the Central Bank that are most clearly credit negative at this point, given the importance of that institution’s role in addressing the growing imbalances in Turkey’s economy and financial system,” Moody’s said.