President Recep Tayyip Erdogan hinted that his newly elected government would return to more traditional economic policies when he appointed Mehmet Simsek to his cabinet to address Türkiye’s high cost of living crisis and other pressures.
From Ankara’s Cankaya Palace, chosen by Turkish founder Mustafa Kemal Ataturk in 1923, Erdogan announced that Mehmet Şimşek, 56, whose name had been circulating for several days, would take over the treasury and finance ministry.
Analysts tell Reuters that the appointment of Şimşek as treasury and finance minister could pave the way for interest rate hikes in the coming months — a marked shift in Erdogan’s long-standing policy of cutting interest rates despite rising inflation.
Who is the new minister and what are his priorities?
Şimšek is a former economist at Merrill Lynch and previously served as Minister of Finance (2009-2015) and then Deputy Prime Minister for Economic Affairs (until 2018).
Şimşek has a personality of international standing and has earned a reputation among Western investors. After Türkiye moved to the executive presidency in July 2018, he was dismissed from the cabinet.
Hopes are pinned on him to achieve the lira’s stability targets, curb inflation, and restore market and investor confidence, after years of unconventional measures that prioritized economic growth over others.
During his new inauguration ceremony in Ankara, Simşek set the single-digit inflation target as his medium-term priority. He promised his ministry to support the central bank in combating rising prices through fiscal policies and structural reforms.
Read: Will the economy decide Turkiye’s elections
“Türkiye has no choice but to return to rational policymaking,” he said.
Bloomberg quoted Şimšek as saying that our “core principles” will be transparency, homogeneity, predictability, and compliance with international standards.
The Minister of Treasury and Finance added: “I am aware of the heavy duties that have been entrusted to me, and I hope that we will come out of it together.”
Local media have speculated that Erdogan and Şimşek have disagreed in the past over the president’s insistence on an unconventional theory that low-interest rates lead to lower inflation.
Since leaving Şimşek, the Turkish lira has lost more than 75 percent of its value against the dollar amid a series of interest rate cuts.
It was not immediately clear whether Erdogan, who often intervenes in fiscal policies including those of the supposedly independent central bank, would allow Simşek, a traditional Western-minded economist, to steer the economy and how to do so.
The new government also included Cevdet Yilmaz, another Orthodox economic director.
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