Turkey's Erdogan ousts central bank governor as lira slides

Turkish President Tayyip Erdogan fired central bank governor Murat Uysal on Saturday and replaced him with ex-finance minister Naci Agbal, acting after a 30% plunge in the lira currency’s value to record lows this year.

The decision to replace Murat Uysal gives Turkey its fourth central bank governor in five years and could stoke longstanding criticism about political interference in monetary policy.

The presidential decree was announced in the early hours Saturday in Turkey’s Official Gazette and gave no reason for the surprise move. A senior official in Erdogan’s AK Party said Uysal was held responsible for the nosedive of the lira, the worst performer in emerging markets this year.

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Analysts said that while Agbal is a close Erdogan ally, he is seen as a capable manager who could take a more orthodox approach to policy. That could ease concerns that have driven Turks to snap up hard currencies at record levels.

“Uysal’s leadership had been utterly disastrous. Agbal cannot be worse, surely. He had a reputation as a decent technocrat,” Timothy Ash at BlueBay Asset Management said on Twitter. “Agbal is actually qualified for the job.”

The lira closed at 8.5445 against the dollar on Friday after touching a 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 after sacking 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”.

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

The AK Party official, speaking on condition of anonymity, said Agbal faced a “difficult test” at his new post, but that he was a “strong name” who could help alleviate some of the pressure on the lira.

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“We will see a stronger central bank governor,” the official said. “The steps taken were unable to stop the rise in the exchange rate. Uysal was removed from his post… He received the bill, in a sense,” the official said.

Agbal “will act smart” and is not seen as someone who would accept political direction, the person added. “It is a difficult post, but steps to stop the rapid rise in the exchange rate must be taken.”

Turkey, a G20 country and the largest economy in the Middle East, roared back from a recession last year on the back of surging domestic lending and state support for the lira – until the COVID-19 pandemic.