Turkey's problem is macro-Erdoğanic, not macroeconomic: İYİ Party leader

Duvar English - Reuters

Opposition parties have said Turkey is paying a steep price for President Recep Tayyip Erdoğan's wayward economic policies after his shock firing of the Central Bank governor sent Turkish financial markets reeling.

Erdoğan dismissed Naci Ağbal on March 20, two days after the governor raised rates to curb inflation. Erdoğan then appointed a critic of tight policy who is expected to reverse recent rate hikes, fuelling fears of political meddling in monetary policy.

The lira slumped as much as 15% after the move, stocks dived and government yields jumped, piling pressure on the credit-fuelled emerging economy, which has been prone to booms and busts during Erdoğan's 18 years in power.

Şahap Kavcıoğlu, a former lawmaker from Erdoğan's ruling Justice and Development Party (AKP) who shares the president's unorthodox view that high interest rates cause inflation, is Turkey's third Central Bank chief since mid-2019.

"Turkey is paying the price for Mr. Erdoğan's thoughtless and reckless decisions with high interest rates, unemployment and high inflation," Good (İYİ) Party chairwoman Meral Akşener told her party's lawmakers in a speech in parliament on March 23. 

She also said her party supported Ağbal prioritizing price stability and faulted Erdoğan's economic management, under a presidential system that came into force after a 2018 election.

"Turkey has no macroeconomic problems. Turkey has macro-Erdoğanic problems... What is the solution? To immediately get rid of this failed system and return to parliamentary democracy," she said.

Erdoğan recently announced an economic reform package but Akşener said it lacked credibility. She said Turkey's economic woes - with inflation above 15%, high unemployment and a gaping current account deficit - left no alternative to high rates.

"High interest rates have become necessary. High interest rates are a fever medicine, not a permanent cure. As the treatment is delayed, it is inevitable for the patient to die," said Akşener, head of the fifth largest party in parliament.

'Unprecedented incompetence' 

Faik Öztrak, deputy head of the main opposition Republican People's Party (CHP), slammed what he called the AKP's "ideological blindness." 

"It is truly unprecedented incompetence to cause the Turkish lira to lose more than 10% in a single day two days after interest rates were raised," he told a March 22 news conference.

Erdoğan has not commented on the move but a deputy head of the AKP, Nurettin Canikli, said Ağbal had been dismissed because he did not use monetary policy instruments rationally.