Turkish Finance Minister Resigns in Second Surprise Departure After Lira Slide

Turkish Finance Minister Resigns in Second Surprise Departure After Lira Slide
Turkish Treasury and Finance Minister Berat Albayrak attends a news conference in Istanbul, Turkey, on April 10, 2019. (Umit Bektas/Reuters)

ANKARA—Turkish Finance Minister Berat Albayrak said on Nov. 8 he was resigning for health reasons, the second surprise departure of a top economic policymaker in two days after the central bank chief was ousted.

The upheaval follows a 30 percent slide in the lira to record lows this year amid the coronavirus pandemic as investors worried about falling forex reserves and the central bank’s ability to tackle double-digit inflation.

Albayrak’s resignation, announced in an Instagram statement confirmed by an official, came a day after father-in-law President Tayyip Erdogan replaced the central bank governor with a former minister whose policies are seen to be at odds with Albayrak.

“I have decided that I cannot continue as a minister, which I have been carrying out for nearly five years, due to health problems,” the statement said. Albayrak became the finance minister two years ago after serving as the energy minister.

Two sources at the presidency could neither confirm nor deny the statement when reached by Reuters, but a Finance Ministry official confirmed its authenticity.

Albayrak, 42, was appointed energy minister in 2015 and shifted to finance after Erdogan was re-elected with sweeping new executive powers in 2018.

During his tenure at finance, Turkey’s economy was hit by two bad slumps, double-digit inflation, and high unemployment. The lira has lost around 45 percent against the U.S. dollar since his appointment and is the worst performer in emerging markets this year.

Lira Rallies

Erdogan, who appointed former finance minister Naci Agbal as the new central bank governor on Nov. 7, would need to approve the resignation.

The departure of Turkey’s top two economic policymakers boosted the lira, which firmed 2 percent to 8.3600 against the U.S. dollar at 1904 GMT, and set the stage for a sharp rate rise, analysts said.

Agbal “might do a better job in getting approval for a rate hike” given his former experience with the government and ruling party, said Selva Demiralp, director of the Koc University-TUSIAD Economic Research Forum.

“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.”

On Nov. 8, Agbal held a meeting with senior executives in the banking sector to discuss macroeconomic expectations and exchange views on policy, said a sector official, speaking on condition of anonymity.

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 said on Twitter he hoped Albayrak’s resignation would be rejected, adding “our country, our people and our community need you.”

Mehmet Mus, the deputy parliamentary group chairman for the ruling AK Party, said Albayrak had taken important steps to strengthen the economy and that he hoped Erdogan wouldn’t accept the resignation.

“We personally witnessed his diligent work. If our president sees fit, I hope he continues at his post,” Mus said on Twitter.

By Nevzat Devranoglu & Orhan Coskun