On November 10th, 2020 Turkish President Recep Erdogan appointed a new Minister of Finance and Treasury – Lutfi Elvan, who served as Minister of Transport, Navigation and Communications from 2013 to 2015. Former Finance and Treasury Minister Berat Albayrak announced his intention to resign two days earlier.
Officially, the resignation is related to ‘health problems’ of the former minister – after five years of public service he is going to spend more time with his family. In reality, Albayrak’s resignation took place the day after Erdogan fired Murat Uysal, head of the Central Bank, replacing him with Naci Agbal, the economist, who was Turkey’s Finance Minister from 2015 to 2018. This happened as the Turkish lira (TRY) suffered a record 30 percent fall against the U.S. dollar (USD). A number of sources report that Albayrak and Agbal face contradictions because Agbal considers Albayrak’s financial policy management style to be too passive.
According to the Western experts, the personnel reshuffle among the financial and economic leadership of Turkey demonstrates the growing political pressure on and within the ruling Justice and Development Party in order to determine the ways out of the permanent economic crisis. Turkey’s challenging economic situation and the political pressure likely forced Erdogan to review his monetary policy. This means that the Turkish leader indirectly recognized the failure of his economic course in the past two years.
As the Turkish economy has been reeling throughout 2020, the opposition has criticized the ruling party’s ineffectiveness and raised concerns that Turkey spent a significant portion of its foreign exchange reserves to support the weakened national currency. According to Goldman Sachs, Ankara spent more than $100 billion of its currency reserves in 2020 to support TRY. All of this led to discontent among the opposition about JDP’s mismanagement of Turkish foreign assets and funds. This gave rise to an internal crisis in the ruling party: a number of prominent members have left it during the past two years due to harsh criticism of the economic course of the government and the president of Turkey personally. In addition, foreign investors are concerned that TRY will keep on devaluing during the work of the new U.S. Administration headed by POTUS Joe Biden, who may deliberately strain relations between Washington and Ankara.
Turkish government’s inability to deliver its vague promises to secure the strengthening of national currency will accelerate the depreciation of TRY, which could further worsen Turkey’s fragile external financial situation.