The Istanbul Stock Exchange was caught in turmoil on Monday March 22 following the surprise dismissal by Turkish President Recep Tayyip Erdogan of the respected Central Bank governor.

The Turkish lira plunged and quotes were halted.

The Turkish lira tumbled more than 17% against the dollar early Monday in currency markets, trading early in the morning in Asia as high as 8.47 TRY for a greenback against 7.22 TRY on the weekend last.

It recovered somewhat thereafter, climbing back to 7.97 TRY around 08:30 GMT.

The quotations were suspended twice in the morning after a drop of more than 6% of the main index, in application of a mechanism which provides for an interruption in the event of strong fluctuations.

This crisis comes at a time when Turkey's economy is already suffering from the impact of the Covid-19 epidemic.

Central bank governor replaced by AKP deputy

The markets are thus bearing the brunt of the impact of the replacement of Naci Agbal, a respected former finance minister, four months after his appointment by Sahap Kavcioglu, an economist and former deputy of the AKP, the ruling party.

The appointment of this new head of the central bank worries investors and casts doubt on the independence of the financial body.

Naci Agbal was dismissed late Friday in a presidential decree that did not put forward an official motive, but came two days after a sharp 200 basis point hike in the main policy rate by the central bank, a measure to fight inflation praised by the markets.

He had only been in post for five months. 

Misunderstanding of the Turks

After these announcements, many Turks seem disillusioned.

"Turkey gives the impression of being a country that does not follow any rules. There is no longer any law, no more democracy and all this has an impact," said Adem Demirtas, a financial adviser met in a street, exasperated. shopping center in central Istanbul.

"Supporting the government does not mean turning a blind eye to its mistakes. If mistakes are made they must be corrected," adds Sukru Kocak, another inhabitant of the city.

Ahmet, a 60-year-old unemployed man, notes bitterly that "prices keep rising".

“I don't know what will happen to us,” he blurted out.

Director sacked accused of promoting inflation

President Erdogan, a proponent of strong growth fueled by cheap credit, has always expressed his opposition to high interest rates.

He thus regularly qualifies them as "father and mother of all evils" and asserts, contrary to classic economic theories, that they favor inflation.

In a series of tweets published Monday, the number two of the AKP, Nurettin Canikli justified the replacement of the head of the central bank, believing that he had not fulfilled his "main task" which is according to him of '' ensure price stability '.

Trying to reassure investors, Turkish Finance Minister Lütfi Elvan said Monday that his country will maintain a free exchange rate regime despite a dramatic plunge in the Turkish lira.

With AFP

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