On Sunday, Turkish Finance Minister, Berat Albayrak, declared his resignation for health reasons, which is the second surprise departure of a top economic policymaker after two days of the dismissal of the central bank chief.
All of these disturbances come after a 30 percent reduction in the lira to record lows this year in the presence of the coronavirus pandemic. The investors are concerned about declining forex reserves and the central bank’s capacity to control double-digit increase.
The resignation of Albayrak that declared in an Instagram statement affirmed by an official came after a day that the father-in-law President Tayyip Erdogan substituted the central bank governor with a former minister whose policies are considered to be controversial with Albayrak.
The statement related: I have decided that I cannot continue as a minister, which I have been carrying out for nearly five years, due to health problems. Indeed, Albayrak became finance minister two years ago after he was in the position of energy minister.
Moreover, two sources at the presidency couldn’t confirm nor deny the declaration when reached by Reuters; however a Finance Ministry official confirms its validity.
In 2015, Albayrak (42 years-old) was selected as energy minister and moved to finance after the re-election of Erdogan with a wide new executive powers in 2018. During the position of Albayrak at finance, the economy of Turkey was hit twice, double-digit inflation and high unemployment. During his appointment, the lira has lost almost 45 percent versus the US dollar and it is the worst performer in developing markets this year.
Actually, Erdogan, who designated former finance minister, Naci Agbal as the new central bank governor on Saturday, would require accepting the resignation. Analysts related that the departure of Turkey’s top two economic policymakers enhanced the lira that increased 2 percent to 8.3600 versus the US dollar at 1904 GMT, and facilitates the way for a high rate rise.
Selva Demiralp, director of the Koc University-TUSIAD Economic Research Forum, said that Agbal might do a better job in getting approval for a rate hike given his former experience with the government and ruling party. He also said: Absent a rate hike, I am afraid the financial crisis will only get worse with the depreciation in the lira that increases the external debt, triggering bankruptcies.
Otherwise, analysts at Goldman Sachs and TD Bank expect a monetary tightening of at least 600 basis points from a 10.25 percent policy rate now. Deputy Transport Minister, Omer Fatih Sayan, wrote on Twitter that he wished that the resignation of Albayrak would be rejected, and adding our country, our people and our community need you.
Furthermore, the deputy parliamentary group chairman for the ruling AK Party, Mehmet Mus, stated that Albayrak had taken important steps to strengthen the economy and that he hoped Erdogan would not accept the resignation. He also said on Twitter: We personally witnessed his diligent work. If our president sees fit, I hope he continues at his post.