The value of the Turkish currency lira has plunged as much as 15 percent after President Recep Tayyip Erdogan decided to abruptly fire the country’s central bank governor early on Saturday.
The dismissal of Naci Agbal triggered the currency to drop during trading on Monday.
Agbal has been replaced by Sahap Kavcioglu, a former banker and a lawmaker from the ruling party. This marks the third time that the Turkish leader replaced the country’s central bank governor in under two years.
Many local and foreign investors were also stunned by the firing of Agbal since he has been playing a vital role in pulling the lira back from its historic lows. His removal is also expected to knock the confidence of investors amid the economic downturn that the country had been facing due to the coronavirus pandemic.
Analysts also predict that Erdogan’s abrupt move would accelerate the already rampant inflation in Turkey which could potentially compel the government to recourse to capital controls or emergency rate hikes.
“With Naci Agbal’s removal from the central bank, Turkey loses one of its last remaining anchors of institutional credibility,” Phoenix Kalen, a markets strategist at Société Générale, wrote in a research note on Sunday, adding that: “Turkey may soon be headed toward another currency crisis.”
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