Status: 02.12.2021 10:17 a.m.
In the midst of the lira crisis, Turkey is getting a new finance minister. President Erdogan commissioned the previous Vice Minister Nebati to head the department. After the announcement, the local currency comes under renewed pressure.
Turkish President Recep Tayyip Erdogan has exchanged finance ministers in view of the severe crisis affecting the local currency, the lira. The previous head of department Lütfi Elvan had submitted his resignation against the background of the decline in the value of the lira. As the new finance minister Elvan’s previous Nureddin Nebati has been appointed, according to the official gazette.
Withdrawal after a year
Elvan had only held office since November 2020, when he was appointed finance minister following the resignation of Erdogan’s son-in-law Berat Albayrak. The recent change at the top of the ministry is related to the massive decline in the value of the Turkish lira. It has lost around 40 percent of its value since the beginning of the year.
In recent years, President Erdogan has repeatedly interfered in the country’s interest rate policy and advocated low interest rates. In his opinion, the high inflation of officially around 20 percent is the result of too high interest rates. In order to lower the inflation rate, one therefore has to lower the key interest rate. With his view, the politician contradicts the generally recognized knowledge of public finance. Many members of the leadership of the Turkish central bank who were more or less against Erdogan’s views have already had to take their hats.
Fears 30 percent inflation
Most recently, the Turkish central bank lowered the key rate to 15 percent despite the high inflation. It was the third rate cut in the past two months. Economists now expect inflation in Turkey to accelerate to around 30 percent in the coming year. It is currently around 20 percent.
Only yesterday the Turkish central bank intervened in the foreign exchange market to support the lira, but without much success. The price is currently just above the record low that was reached during the week.