Turkish Lira Collapse: Can It Be Solved?

Turkish Lira Collapse: Can It Be Solved?

Daniel Lacalle 25/03/2021 8
Turkish Lira Collapse: Can It Be Solved?

The Turkish Lira tumbled as much as 15% after President Recep Tayyip Erdogan sacked Naci Agbal, the country's central bank governor this past Saturday. 

Erdogan replaced him with Sahap Kavcıoglu in a surprise move. This is the 3rd central bank governor exit in less than 2 years.

The former central bank governor played a major role behing pulling the lira back from historic lows.

Mr Ncai Agbal, appointed in November 2020, had been raising interest rates to prevent an inflation rate running above 15%.

The dismissal of Mr Abgal has shocked both local and foreign investors who had previously praised Turkey's central bank's recent monetary policy.

Investors have been calling for stricter monetary policy to tame the high inflation rate, as prices keep on rising rapidly in Turkey.

The appointment of Sahap Kavcioglu, a former banker and ruling party lawmaker, sparked massive concerns from investors of a reversal of recent rate hikes.

The fallout from the sacking hit shares on the Istanbul stock exchange.

It also raised red flags about the impact of the country's borrowing costs.

Trading on the exchange was suspended for a short period after a fall in share prices triggered automatic circuit breakers.

Following a sharp drop, the Turkish lira gained some ground to stand about 8% lower against the US dollar after Finance Minister Lutfi Elvan said that Turkey would comply with the free market rules.

The newly appointed central bank governor, Sahap Kavcıoglu, met this Wednesday with the general managers of Turkish banks to discus a range of topics including monetary policy, inflation, global developments and the demands of the banking sector.

What unfolded in Turkey proved that some central bank policies still matter, as does the person who runs the institution.

Turkish_Lira_Collapse.png

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  • Mark Elliott

    Erdogan did it again: He lost the plot.

  • Sam Price

    Why did Erdogan fire the former central bank governor while doing extremely well given covid and inflation? He will regret this decision unless he has another solid economic plan.

  • Ross Smith

    Bad move for Turkey

  • Chloe Freeman

    The Turkish Lira still hasn't recovered

  • Richard Gray

    Losses keep on pilling, credit agencies will act soon.

  • Chris Henderson

    Turkey was very dynamic a few years ago and had a great future but political problems are harming the country.

  • John Bown

    History is repeating itself, all over again.

  • Rob Shale

    Failing economy, lack of foreign allies and internal division. If Erdogan wanted to reborn the Ottoman empire he unironically did a good job.

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Daniel Lacalle

Global Economy Expert

Daniel Lacalle is one the most influential economists in the world. He is Chief Economist at Tressis SV, Fund Manager at Adriza International Opportunities, Member of the advisory board of the Rafael del Pino foundation, Commissioner of the Community of Madrid in London, President of Instituto Mises Hispano and Professor at IE Business School, London School of Economics, IEB and UNED. Mr. Lacalle has presented and given keynote speeches at the most prestigious forums globally including the Federal Reserve in Houston, the Heritage Foundation in Washington, London School of EconomicsFunds Society Forum in Miami, World Economic ForumForecast Summit in Peru, Mining Show in Dubai, Our Crowd in Jerusalem, Nordea Investor Summit in Oslo, and many others. Mr Lacalle has more than 24 years of experience in the energy and finance sectors, including experience in North Africa, Latin America and the Middle East. He is currently a fund manager overseeing equities, bonds and commodities. He was voted Top 3 Generalist and Number 1 Pan-European Buyside Individual in Oil & Gas in Thomson Reuters’ Extel Survey in 2011, the leading survey among companies and financial institutions. He is also author of the best-selling books: “Life In The Financial Markets” (Wiley, 2014), translated to Portuguese and Spanish ; The Energy World Is Flat” (Wiley, 2014, with Diego Parrilla), translated to Portuguese and Chinese ; “Escape from the Central Bank Trap” (2017, BEP), translated to Spanish. Mr Lacalle also contributes at CNBCWorld Economic ForumEpoch TimesMises InstituteHedgeyeZero HedgeFocus Economics, Seeking Alpha, El EspañolThe Commentator, and The Wall Street Journal. He holds a PhD in Economics, CIIA financial analyst title, with a post graduate degree in IESE and a master’s degree in economic investigation (UCV).

   

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