Turkey faces currency crisis after Central Bank Governor’s dismissal
Analysts have warned that Turkey faces a fresh currency crisis after its Central Bank’s Governor, Naci Agbal, was removed from office just four months in the job.
In under two years, three of its governors have been booted out of office by the country’s president, Recep Tayyip Erdogan.
The latest, Naci Agbal, came flying out in the wee hours of March 20th. (The same night, for good measure, Mr Erdogan withdrew Turkey from an international convention protecting women from violence.) The Turkish lira plunged by as much as 15% against the dollar in early trading on March 22nd, before recovering some of its losses.
Istanbul’s main stock-exchange index fell by more than 9%.
The Turkish lira is back on the ropes and the stockmarket is tumbling. The brutal reaction to Naci Agbal's ousting may give Recep Tayyip Erdogan some pause for thought https://t.co/UwvDMNDZnz
— The Economist (@TheEconomist) March 23, 2021
Mr Agbal’s removal may be the most dramatic to date. With a series of long overdue interest-rate increases, including one of two percentage points on March 18th, the governor had offered investors a glimmer of hope that the central bank was something other than an extension of Mr Erdogan’s government. That hope is now gone. A reversal of Mr Agbal’s policies seems imminent.
The lira, which had surged back to life after losing half of its dollar value in under four years, is back on the ropes.
Mr Agbal’s willingness to take tough measures to rein in inflation and an unsustainable credit boom had raised hopes. With a single stroke of his pen, Mr Erdogan sent them, and Turkey’s currency, crashing back down.
“This decision is almost as bad as Brexit in terms of being the worst public-policy decision I can remember in a country’s history,” wrote Timothy Ash of BlueBay Asset Management.
Source: The Economist
