ISTANBUL: Turkish President Tayyip Erdogan removed the central bank governor from his post on Saturday and replaced him with former finance minister Naci Agbal after the lira currency hit record lows, having lost 30% of its value since the start of the year.

The decision to replace Murat Uysal as governor was made by presidential decree, which was announced in the country’s Official Gazette. It was not immediately clear why Uysal had been replaced.

The lira closed at 8.5445 against the dollar on Friday after a touching record low of 8.58, despite dollar weakness as votes were still being counted in the US election.

Erdogan had appointed then-deputy governor Uysal to head the central bank in July 2019 when he sacked his predecessor Murat Cetinkaya amid the president’s frustration that the bank had not cut interest rates to boost the economy.

Erdogan, a self-described enemy of high interest rates, has repeatedly called for lower borrowing costs. Last weekend, he said Turkey was fighting an economic war against those squeezing it in “the devil’s triangle of interest and exchange rates and inflation.”

Naci Agbal had been finance minister from 2015 until 2018, when he was appointed to head the directorate of presidential strategy and budget.

At the last meeting of its monetary policy committee on Oct. 22, the central bank bucked expectations for a big interest rate hike and held its policy rate steady at 10.25%, triggering sharp losses in the lira.

The bank, which also surprised markets a month earlier when it hiked rates, said it would continue with liquidity measures to tighten money supply. It raised the uppermost rate in its corridor, the late liquidity window, to 14.75% from 13.25%.

However, the lira has continued to slide despite those measures, weakening 30% against the US currency this year to become the worst performer in emerging markets.

Bearishness toward the lira stems from concerns about possible Western sanctions against Turkey, depleted reserves, high inflation and political interference in monetary policy.

Analysts are concerned that Turkey’s ties could suffer if Democrat Joe Biden becomes US president.

Turkey’s Milliyet newspaper reported on Thursday that Finance Minister Berat Albayrak had ruled out intervening to support the lira, reiterating government concerns that raising interest rates could hurt the economy. 

Reuters