Erdogan makes life harder for Turks

For many people in Turkey, life is getting harder. The economy is down, and not just because of the pandemic but also the president's irrational decisions.

Turkey sees fourth central bank chief in less than two years after President Tayyip Erdogan rocked financial markets by firing Naci Agbal, a well-respected governor who had hiked rates just last month.

Erdogan was uncomfortable with Agbal’s investigation into the $128 billion in FX sales undertaken during his son-in-law Berat Albayrak’s stint as finance minister, sources said.

The shock decision on March 20 raised expectations that the policy rate, now at 19 percent, would soon be cut and sent investors fleeing, knocking the lira 12 percent lower. For many analysts, Erdogan’s latest intervention has left the bank’s credibility in tatters.

Ratings agencies say the reaction to Erdogan’s decision and the harm it does to monetary policy independence raises the risk of a balance-of-payments crisis given Turkish banks and companies have some $160 billion in short-term foreign debt.

The lira’s slide, along with higher oil prices, has meanwhile raised import prices and pushed inflation up to 16.2% in March. Wall Street banks predict it will reach as much as 19 percent this quarter, keeping basic living costs high for Turks hit by the pandemic and joblessness.