by Burak Akinci
ANKARA, Nov. 10 (Xinhua) -- Turkish President Recep Tayyip Erdogan has surprisingly reshuffled the management of the economy, prompting the embattled lira, which dipped to record lows in recent weeks, to reduce its losses against foreign currencies.
Last Saturday, the Turkish leader dismissed the governor of the central bank Murat Uysal and replaced him with former Finance Minister Naci Agbal.
A bombshell came the following day, on Sunday, when Treasury and Finance Minister Berat Albayrak, who is also the son-in-law of Erdogan, unexpectedly announced his resignation on social media, citing unspecified "health reasons."
Albayrak, 42, had been in the position since 2018, but the Turkish currency lost 30 percent of its value since the start of this year.
The country was already recovering from a currency crisis when the coronavirus pandemic hit.
Albayrak was criticized for spending billions of foreign currency reserves through state lenders but failed to stop the erosion of the lira. He has often blamed Turkey's economic woes on foreign powers.
Albayrak has been replaced on Tuesday by Lutfi Elvan, former deputy prime minister of Turkey, according to a presidential decree published in the Official Gazette.
The shocking departure of Turkey's two top economic policymakers at the weekend has generated a favorable effect on the lira which gained about 6 percent against the U.S. dollar on Monday, the most in two years.
The new governor, Agbal, said following his appointment that the bank would focus on lowering high inflation and use all policy tools, in a statement described as "market-friendly" by analysts.
"The change in the management of the central bank strengthens the expectation for a return to traditional monetary policies," commented economist Enver Erkan from Tera Securities, in a note to investors, suggesting that the bank could proceed to a fresh hike in interest rates following a similar move in September to stop the depreciation of the lira.
"These developments have the potential to create radical changes in economic administration and monetary policies," he said, regarding the changes in the economic management.
Erkan, however, cautioned that the future monetary action is to be seen, adding that the central bank's next monetary policy committee meeting, which would decide rate hikes, is scheduled for Nov. 19.
President Erdogan vowed Wednesday for a new era in the Turkish economy through the coordination of economic management, making structural reforms, and taking new steps to improve the investment climate.
"We will achieve our goals by building economic policies on three pillars: price stability, financial stability, and macroeconomic stability. For this, we are preparing a favorable environment for long-term savings and investments," the president said while addressing his lawmakers at the parliament.
He pledged to create a growth structure financed by domestic savings and international investments, and emphasized that the government establishes a business environment based on trust and stability.
Turkey has been hit by two sharp contractions in the past two years. Though the economy is recovering from the coronavirus fallout, inflation is stuck around 12 percent and unemployment is high, especially among youths, and is expected to jump again when a ban on layoffs is lifted in December.
A source close to the government told Xinhua on condition of anonymity that Turkey would soon re-engage in the path of substantial growth, allowing "every layer of the society to benefit from prosperity."
The Turkish leader has repeatedly said that he wants to maintain interest rates low to spur lending and economic growth.
Ugur Gurses, an economist and former Central Bank staff, indicated that the decision to keep rates low has spurred a decline of the lira and a rush of households to buy billions of dollars to protect their savings from inflation.
"But the consequences of government monetary policies on the treasury has been huge" as reserves have been depleted to try to maintain the lira afloat, he remarked.
Gurses added that the new central bank chief should now work in order to stabilize the national currency with new monetary decisions and guidelines. Enditem
