Turkey’s new economic team facing obstruction to reforms, columnist says

Turkey’s new finance minister and central bank chief are facing resistance from bureaucrats to the reforms they have promised to cure the country’s economic ills, said columnist Erdal Sağlam.

Turkish President Recep Tayyip Erdoğan appointed former finance minister Naci Agbal as the governor of the central bank on Nov. 7 and hired Lutfi Elvan, an ex-deputy prime minister, as treasury and finance minister three days later.

Erdoğan announced that the two officials had a remit to take swift steps to restore investor confidence in the economy. Anticipation of the reforms had helped the lira recover from all-time lows. But the rally in the currency has reversed in recent days, as optimism among investors turned into doubt, Sağlam said in the Cumhuriyet newspaper.

The nature of a banking regulator decision this week to abolish an asset ratio for banks, a measure which had coerced the companies into approving more loans, appears to demonstrate resistance among the political leadership or bureaucrats hired by former Treasury and Finance Minister Berat Albayrak to economic and financial reforms, Sağlam said.

Instead of implementing the measure with immediate effect, the regulator announced that the ratio would be abolished on Jan. 1.

“The immediate removal of the asset ratio would have been a highly symbolic decision for the markets. It would also have shown that the new economic administration was taking the initiative, but obviously someone did not want that perception,” Sağlam cited one unidentified financial market professional as saying.

Albayrak, Erdoğan’s son-in-law, also remains as deputy chairman of the country’s sovereign wealth fund despite resigning from his ministerial post, Sağlam said. Erdoğan is the fund’s chairman.

“It should be said that the decisions on the economy to be taken in the near period will be closely correlated to the success of the new economy management. If there is no decision to correct things, then a perception will spread that the old understanding will continue despite the new team,” Sağlam said.

The Turkish lira fell to an all-time low of 8.58 per dollar on Nov. 6. It had rallied to as high as 7.5 per dollar last week, when the central bank hiked interest rates to 15 percent from 10.25 percent to help steady the currency. It traded little changed at 7.92 per dollar on Thursday.

Sağlam was formerly a leading columnist on Turkey’s economy for Hürriyet, one of Turkey’s best-selling newspapers.