Markets did not take well to Turkish President Tayyip Erdogan appointing Nureddin Nebati, a strong supporter of his low-interest rate drive as minister of Treasury and Finance on Thursday, as the Turkish Lira reached its lowest ebb ever, losing 1.32% overnight.
The lira, opened on Friday at 15.28 to the Euro, down from 15.08 on Thursday. The Turkish currency has lost about 40% of its value since the start of the year.
Erdogan appointed Nebati on Thursday after Lutfi Elvan resigned, allowing the Turkish leader to have replaced the last top official seen to oppose his interest-cutting policies.
Nebati’s appointment comes amid a currency meltdown, with the lira crashing 27% in the last month alone. It has hit a series of record lows over the direction of economic policy, with Erdogan fixated on slashing interest rates in a bid to boost economic growth.
Erdogan ardently argues that high interest rates cause inflation – contrary to conventional economic thinking – and has made clear that the country would press ahead with rate cuts.
Nebati is seen to be an advocate of Erdogan’s economic policies, and very close to his son-in-law Berat Albayrak, who during his two-year term as Finance Minister had set Turkey’s lira on the downward trend.
Albayrak’s appointment in July 2018 had fuelled investor unease about competence and orthodoxy of economic policymaking, with the Turkish lira losing 3.8% of its value within an hour of his appointment.
Nebati, 57, who has a doctorate in political science and public administration, is known to be a supporter of Erdogan’s drive to reduce interest rates, even with inflation running at around 20%.
“We will experience a process in which steps are taken within the scope of policies that are determined by our president,” Anadolu News Agency quoted him as saying as he took office in a brief ceremony.
International investors are uneasy over Erdogan’s strong grip over economic policies and interference in policy making.
Elvan’s departure marks the latest in a rapid turnover at top economic positions, including Erdogan’s successive firing of three central bank governors in the last 2-1/2 years, moves seen to have battered the credibility of policymaking.
Elvan was seen as one of the last ministers who might convince Erdogan to reconsider, given what analysts see as the bank’s tattered credibility.