Turkey’s President Recep Tayyip Erdogan appointed his son-in-law Berat Albayrak as head the ministry of finance on Monday evening.
Albayrak replaces the experienced Mehmet Simsek.
The political rookie became a member of parliament in 2015. Although he has an MBA and some experience as a CEO of a major media conglomerate, it is feared he will simply echo President Erdogan’s conviction that Turkey’s economy needs a low-interest rate policy to promote investment and growth.
Erdogan has scrapped a five-year term limit for the Governor of the Turkish Central Bank, making clear he wants political control over monetary policy. All eyes are now on the Turkish Central Bank, which is due to make its next interest rate policy announcement on July 24. Analysts will be looking to see how politically controlled monetary policy in Turkey is.
Under the new constitution members of the cabinet cannot be MPs and are entirely reliant on the President for their political legitimacy. That is more the case for a political neophyte without an independent power base.
The news of the appointment saw the lira slide against most reserve currencies on Tuesday. Currency devaluation is already fueling inflation with most market analysts calling for a rise in interest rates.
At the same time, sovereign bond yields continue to surge to record levels.
The Turkish economy is apparently growing by 7,4%, a feat hailed as “truly impressive” by the International Monetary Fund. However, a ballooning current account deficit and double-digit inflation is giving cause for concern.
Markets fear both a currency crisis and, gradually, concerns are raised over the cost of refinancing debt.