Erdogan said the bank’s status limited the government’s room for manoeuvre in economic policy-making. His remarks were reported by Milliyet newspaper and he reiterated them on Friday after Economy Minister Ali Babacan spoke in support of the bank’s independence at a London investment conference.

The Turkish Central Bank declined to comment.

Erdogan also said he would never give autonomy to the Revenue Administration as sought by the International Monetary Fund — which also pressed for central bank independence after a domestic financial crisis in 2001.

‘We are not thinking of making the Revenue Administration autonomous. We will reform it as it is,’ he told members of his party in a speech on Friday in which he also repeated his opposition to autonomy for some state institutions.

‘There are some autonomous institutions and now they are a source of difficulty for us. I do not approve of the status of the central bank,’ Milliyet had quoted Erdogan as telling newspaper editors at a dinner.

Economy Minister Babacan, asked about central bank autonomy on Friday in London, said it had been one of the bases of the country’s economic success.

‘Our central bank, which is independent, has done an excellent job on price stability; this will continue to be the case,’ Babacan said.

TAX FINE ROW

Turkey’s Revenue Administration has come under scrutiny after a tax authority decision to levy a record $2.5 billion tax fine on Turkey’s largest media group Dogan Yayin for late taxes.

The fine has raised concern among critics that the government in the European Union applicant country is seeking to choke off Dogan Yayin for hostile coverage.

Prime Minister Erdogan said during the dinner that while he had to account for the central bank’s policies, he had no power over its monetary policy. However, he said the government would not intervene in the central bank’s status.

Central bank independence is the norm within the EU, and a precondition for countries aspiring to join the euro bloc.

Turkey’s central bank was given autonomy to focus on price stability with the encouragement of the IMF. Since then it has come under attack from the government.

However market analysts say the central bank has proved its credibility. ‘There is no government interference in the central bank which draws our attention. The bank is institutionally independent and its law is consistent with global standards,’ said Citi economist Engin Dalgic in Istanbul.

IMF DEAL UNCERTAINTY

Investors are waiting to see if Turkey will sign a loan deal with the IMF, after the last one expired over a year ago, although analysts are divided on whether the country needs it.

Economy Minister Babacan said discussions with the IMF on a possible new standby arrangement were continuing.

‘If we can have an agreement we would prefer to have a standby arrangement because we believe external financing that will come by a possible standby arrangement will help strengthen confidence in Turkey and will help our economic growth,’ he said. ‘If we can agree, it’s good, if not it’s not going to be the end of the world.’

The IMF welcomed a medium-term economic plan Turkey published this week, but said if it wants to meet public debt targets it will need to adopt additional measures, including policies to tackle spending pressures.

On the central bank, Babacan said: ‘The number one priority of our central bank is price stability, and, only if it doesn’t conflict with the price stability target, the central bank looks at growth, employment. This is going to be the case for years to come. Fighting inflation is going to be our very high priority.’

Inflation this year is expected to be lower than the 7.5 percent target of the central bank, which has cut its borrowing rate by 9.5 points since late 2008.