have been achieved by means of such a programme, it will be a rational decision to make the central bank responsible for maintaining price stability. the second point i want to stress concerning the price stability target concerns microeconomic functions of central banks. efficient operation of a payments system and supervision of the banking sector are two other basic functions of a central bank. these two functions can also be performed in a way that supports price stability targets : indeed, a sound, effective financial sector and payments system are necessary conditions for price stability. duties assumed by the central bank of turkey in the economy, which aims at price stability, should be consistent with the target. functions that conflict with the price stability target or which cause difficulties for the achievement of this target should not be assigned to the central bank. and this should be the basic theme of the bank ’ s medium and long - term strategic planning. [UNK] whether or not those functions assumed by the central bank as a result of such factors as the country ’ s geographic size, history, legal structure and degree of technological development operate as impediments to the achievement of stability targets, can be examined by means of several criteria. effective use of monetary policy is an absolute necessity for a central bank that takes price stability as its first priority. we must therefore review those functions of the central bank that interfere with the effectiveness of monetary policy. at this point, i would like to emphasise the importance of increasing the central bank ’ s control over its own balance sheet, which is one of the main conditions required for the effective implementation of policies, mainly monetary policy, that must be adopted in order to achieve the price stability target. over the past decade, substantial improvements have been visible in the central bank ’ s balance sheet, especially on the asset side. foreign assets increased, while domestic assets dropped sharply due to the decrease in loans to the public sector, including valuation accounts. the final step to be taken in this area will be to reduce, by law, the advances made by the central bank to the treasury to zero. pursuant to the protocol between the central bank and the treasury, signed in the second half of last year, the effectiveness of the monetary policies pursued by the central bank increased during this period. an amendment to our laws will ensure the continuance of this favourable condition. and the revision of the financial relationship between the central bank and the treasury and the increase in the central bank ’ s control over its balance sheet will aid the achievement of the price stability target.

durmus yılmaz : central bank achievements and opportunities in turkey speech by mr durmus yılmaz, governor of the central bank of the republic of turkey, to members of the press at the central bank of the republic of turkey, ankara, 18 april 2006. * * * dear press members, i have been appointed governor of the central bank, which was vacated by former governor mr. sureyya serdengecti due to his retirement after having completed his five - year term on 14 march 2006 at the end of the business hours, and which has been filled temporarily by dr. erdem bascı as acting governor since then. i have worked in various positions of the central bank of the republic of turkey since 1980. as you have been closely following, many achievements have been made since then, especially in the last couple of years, that will always be remembered as the turning points in our economic history. distinguished members of the press, as a result of the legal amendments made in 2001, the greatest achievement in the area of monetary policy has been the attainment of the “ central bank independence ”. accordingly ; “ the bank shall, with the objective to achieve and maintain price stability, be authorized to utilize monetary policy instruments described in this law and shall also be authorized to directly determine and implement other monetary policy instruments that it deems appropriate. ” as expressed in the law on the central bank. such an authorization is called “ instrument independence ” in the modern economic literature. on the way to price stability, the inflation target is determined jointly with the government. as you know, these targets have been determined and announced as follows : 5 percent for 2006, 4 percent for 2007, 4 percent for 2008 our primary objective is to attain these targets. the central bank will support the growth and employment policies of the government, unless it conflicts with this objective. likewise, with the law no : 1211, the central bank has been entrusted with the power of establishing the “ exchange rate regime ” jointly with the government. the floating exchange rate regime, which was introduced within this framework, will continue to be implemented, preserving its basic implementation framework. turkey has grasped a golden opportunity to get rid of the damage created by inflation with which it has had to live more than 30 years. the period of “ declining inflation ” is about to end. our next objective will be to achieve and preserve the price stability. this will be the most significant contribution of the central bank in mob