After weeks of economic instability in which inflation skyrocketed and the currency sank to record lows, Turkish President Recep Tayyip Erdogan has sacked the country’s finance minister.
This year, the currency has lost more than 40% of its value versus the US dollar, making it the worst-performing emerging market currency.
Erdogan accepted Lutfi Elvan’s resignation and named his deputy, Nureddin Nebati, as the new finance minister in a presidential decree released near midnight on Wednesday.
Nebati, 57, graduated from Istanbul University with a bachelor’s degree in public administration and a master’s degree in social sciences. He has a doctorate in political science and public administration from Kocaeli University in Turkey.
His predecessor had only been in the position since November 2020, when he was appointed following Erdogan’s son-in-law Berat Albayrak’s departure.
Throughout Elvan’s year in office, he faced various crises.
The Turkish Central Bank intervened in markets earlier on Wednesday to support the lira, which has lost about 30% of its value against the dollar in just a month.
Under Erdogan’s persuasion, Turkey’s supposedly independent central bank cut its main interest rate for the third time in less than two months in November. Despite inflation topping 20% – four times the government’s aim – it did so.
Erdogan believes that high interest rates lead to high inflation, despite the fact that this is contrary to traditional economic theory, and has stated that he will keep rates low.
Turkey’s currency fell to a new low of more than 14 to the dollar on Wednesday, recouping some of its losses following a central bank decision to sell reserves. As of Wednesday afternoon, one dollar bought 13.22 lira.
The rebound was short-lived, however, as Erdogan appeared to defend his “new economic paradigm” against “interest malice.”
Three central bank governors have been fired by Erdogan since 2019, all of whom resisted his goal for lower interest rates. Lower rates, according to the president, will battle inflation, stimulate economic growth, power exports, and generate jobs by blaming the lira’s woes on foreigners damaging Turkey’s economy and their sympathisers in the country.
Turkey’s economy grew 7.4% in the third quarter compared to the same period a year ago, according to numbers released on Tuesday, but some analysts predict the boost will be short-lived due to high inflation and currency depreciation.
Meanwhile, public dissatisfaction looks to be increasing.
Demonstrators opposed economic measures in Istanbul and Ankara last week, while the main opposition Republican People’s Party plans a rally for early elections in the southern city of Mersin on Saturday.
