Hafize Gaye Erkan (41), a Turkish financial expert and banker living in the United States, has been appointed the new governor of Turkey’s central bank. She is the first woman to hold this prestigious position. Her appointment is the latest sign that President Erdogan wants to return to more conventional economic policies after his election victory. Because the interest rate cuts of recent years have led to a fall in the lira and the highest inflation in more than twenty years. As a result, the standard of living of Turks is plummeting.
Erkan takes over from Sahap Kavcioglu, a former newspaper columnist who was a staunch cheerleader of Erdogan’s “new economic model.” After his appointment in 2021, he introduced a series of rate cuts to boost the economy ahead of this year’s elections. Meanwhile, he squandered tens of billions of dollars in foreign reserves in an attempt to prop up the lira ahead of the polls. Now that Erdogan has won the elections and the central bank has no more reserves to defend the lira, he is changing course.
She has the right credentials
Erkan’s appointment comes days after the appointment of former deputy prime minister Mehmet Simsek, who has the confidence of foreign investors, as finance minister. Erdogan also appointed Cevdet Yilmaz as vice president, another former deputy prime minister known as an advocate of orthodox economic policies. The appointments have fueled growing optimism among foreign investors that Erdogan will return to more conventional policies as Turkey’s currency has plunged and the economy teeters on the brink of a balance of payments crisis.
Erkan has the thankless task of taming inflation, stabilizing the lira and restoring confidence in monetary policy. She has the right credentials for that. Born in 1982 in Istanbul, she studied industrial engineering at Bogaziçi University. She graduated cum laude in 2001, after which she received scholarship offers from nine universities. She chose Princeton and moved to the US at the age of 21. She earned a PhD in Operations Research and Financial Engineering, after which she went on to work in the financial industry.
The state gave us education, but then did not support us
Hafiz Gaye Erkan
‘Turkish companies rejected me’
“I was disappointed in Turkey,” Erkan told the leftist newspaper Sözcü about her move abroad as a young woman. “The state gave us education, but then did not support us. Turkish companies rejected my application for an unpaid internship. I had no money for a plane ticket to the UK for an engineering competition. My suitcase was ready for days. I waited next to it crying. I wanted to do my PhD in Turkey, but someone’s relatives always take precedence. I wanted to return one day to serve my country and end nepotism.”
Erkan began her career at US investment bank Goldman Sachs, where she led the Financial Institutions Group Analysis and Strategies department for nearly a decade. She was named a financial talent by various magazines. In New York she earned a reputation as “tough, smart and effective,” said Kathryn Wylde, CEO of the NGO Partnership for New York City, where Erkan was a director. “She’s certainly someone who can hold her own, but she can also have a contrary opinion without being obnoxious,” Wylde told Reuters.
‘She warned First Republic’
Between 2014 and 2021, Erkan was a board member at First Republic Bank, which went bankrupt this year after a bank run. It was the second largest bankruptcy in US banking history. Erkan served as co-CEO of First Republic from July to December 2021. According to some international media, she was partly responsible for the bankruptcy of the bank because of the position she took. Other media report that she warned the board of directors in time about the upcoming crisis, but that she resigned when she could not convince them of her strategy.
Erkan is the fifth central bank governor in four years. This fact illustrates how much Erdogan has undermined the bank’s independence. Erkan will want to restore independence and meritocracy within the bank after years of institutional erosion. But that will not be an easy task. The question is how much room it will have to take painful measures, such as raising interest rates. Because next year there will be local elections again. If it suits Erdogan politically, he will not hesitate to overthrow Erkan and appoint a loyalist.
“One of Erkan’s biggest challenges this year is to restore the working atmosphere at the central bank,” Erik Meyersson, head of emerging markets at Swedish bank SEB, tweeted. He points to the dozens of employees who left the bank or were fired because they did not agree with Erdogan’s unorthodox monetary policy. “Too many smart economists and bureaucrats were purged, transferred, demoted, and exiled. There is a pool of talent that Erkan should tap into. But do these people want to return?”
A version of this article also appeared in the June 10, 2023 newspaper.
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