There’s a strong feeling on the markets that outspoken Turkish President Recep Tayyip Erdogan would be too proud to call in the International Monetary Fund (IMF) to help sort out Turkey’s economic travails, while he’s thrown plenty of brickbats the way of US global financial market actors in recent months while peddling his populist theory that Turkey is under “economic attack”—so is the Turkish government’s hiring of “The Firm”, namely US-based “blue-blooded” international consultancy firm McKinsey & Company, a behind-the-scenes bow to Ankara’s need for rather more market orthodoxy in finding the way out of its financial crisis?

Erdogan’s son-in-law, Finance Minister Berat Albayrak, revealed that the Turkish government has decided to work with McKinsey on September 28 during a talk show event held at the 9th Turkey Investment Conference organised by the Turkey-U.S. Business Council (TAIK) in New York, according to various media reports. The firm—described in a 1993 Fortune Magazine profile as "the most well-known, most secretive, most high-priced, most prestigious, most consistently successful, most envied, most trusted, most disliked management consulting firm on earth"—is to specifically work with the Cost and Transformation Office established under the scope of the new three-year medium-term economic programme unveiled by Albayrak on September 20.

Albayrak is battling to convince the markets that Turkey has a grip on the country’s economic turmoil, with market analysts anxious that too many wrong steps could cause the country’s currency meltdown to morph into a banking crisis. Ankara has dismissed the idea of turning to the IMF for a bailout or bringing in capital controls, while it has indulged in directing “economic war” rhetoric at US President Donald President, accusing him of employing financial attacks to divert Turkey from its “native and national policies”.



Frosty and dismissive

Turkey’s frosty and dismissive attitude to advice from the IMF was demonstrated in mid-February before the country’s overheating economy came off the rails. After the IMF suggested that reining in inflation remained the most important challenge facing the Turkish central bank’s monetary policy—and front-loaded monetary tightening was called for to secure the credibility of the regulator’s inflation forecasts and to move closer, over time, to its 5% inflation target—Cemil Ertem, an advisor to Ertem, said on state broadcaster TRT: “They tell us to slow down growth. We’re going to do the exact opposite.”

The Cost and Transformation Office will include representatives from all of Turkey’s 16 ministries and will control the government’s targets and results on a quarterly basis, according to Albayrak.

There has as yet been no official announcement of the agreement with McKinsey. The nature of the deal has come under fire from the opposition who are pushing the line that, embarrassed by their economic predicament, the Erdogan administration is aiming to implement an IMF programme without the humiliation of actually using the IMF.

On September 29, the finance ministry issued a press release, rejecting the criticism from the opposition, but it did not mention McKinsey’s name.

“[…] after Our Minister raised the name of one of the consultancy firms that many public and private institutions have previously received service from…,” the press release said in an oblique reference from the ministry to McKinsey. Allegations from the opposition such as the government is “leaving the economy to this consultancy firm” or is essentially “returning back to the IMF programme” were rebutted.

In 2000, the then Turkish government assigned McKinsey to finalise the merger process of eight troubled private banks that had been taken over by the Savings Deposit Insurance Fund (SDIF).

The following year, the SDIF decided to hire McKinsey for consulting services on the reorganisation of its Collection, Participations and Real Estates Offices. The statement that accompanied the hiring said that non-performing loans, subsidiaries and real estates of the Fund banks were managed with these departments, and that the assets should be liquidated, collected or sold in the most rational way.

In 2004, McKinsey suggested the transfer of Pamukbank to state-run Halkbank after attempts to sell the lender, which was under SDIF control, failed.

McKinsey in 2005 suggested that the public offering method would be the most appropriate privatisation method for Turkish public banks.

In 2013, the Privatisation Administration (PA) hired McKinsey to advise on Turkish Airline’s operations and growth strategies, including privatisation strategies. The news immediately led to speculation in local media that the PA was preparing to sell the state’s 49.12% stake in the flag carrier but the PA subsequently dismissed the suggestion.