Babacan says Erdoğan should appoint himself central bank chief

(updates with remarks on foreign exchange reserves)

Turkish President Recep Tayyip Erdoğan should appoint himself central bank chief as a permanent solution to problem of the ever-changing governor of the institution, opposition Democracy and Progress Party (DEVA) leader and former economy minister Ali Babacan said on Sunday

Erdoğan should issue a presidential decree declaring that he is taking over the position, Diken news site cited Babacan as saying, just as he appointed himself chairmanof the country's sovereign wealth fund in 2018.

Babacan’s remarks arrive as Turkey’s president on Saturday fired the central bank governor, who served four months in office, winning the praise of investors for hiking interest rates and promising tighter monetary policies. 

The decree published in the Official Gazette saw Naci Ağbal, the country’s third central-bank governor in less than two years, replaced by banking professor Sahap Kavcıoğlu, whose views on the economy align with those of Erdoğan.

“It is bad governance to change central bank chiefs so quickly,’’ the former Erdoğan ally said. “The institution, which should be the county’s most esteemed institution, has practically been turned into a punching bag. There can be no economic governance with such an administration.’’

On Monday, Turkey’s stocks, bonds and the lira tumbled over the shock of Ağbal’s dismissal, triggering concern the country is headed for another wave of currency turbulence.

Babacan on Monday continued addressing issues surrounding the Turkish central bank.

The DEVA Party leader addressed rumours that the Turkish president sacked Ağbal after the governor began an investigation into where the $130 billion in foreign exchange reserves had gone, Gerçek Gündem news site reported.

Babacan said he would not be“surprised’’ if that was the case.

Turkey’s state-owned banks sold some $130 billion to stabilise the lira over the last two years, in a move that was supported by swaps from the central bank. The bank's foreign currency fell by three-quarters in 2020, to $11 billion.

It has become normal for the country’s bureaucrats to probe such matters, Babacan added, as they are taught that “public money belongs to the nation.’’

Babacan, who founded DEVA last year, served as economy minister between 2002 and 2007, as foreign minister from 2007 to 2009, and then as deputy prime minister in charge of the economy between 2009 and 2015. He is credited with successfully completing an economic programme with the International Monetary Fund between 2002 and 2008.