Erdogan sacks another deputy governor of the central bank

Turkey is in the midst of a gradual return to normality, after a second total shutdown announced about a month ago, which lasted for 17 days. The coronavirus has fully affected the Turkish economy, which has come to a sudden halt during the second quarter of 2020. As a result, fiscal, monetary and financial measures focused support on alleviating some of the most severe consequences of the pandemic.

But despite these measures, shrinking reserves, rising inflation, rising debt and a currency devaluation, as well as the dismissal of the former governor of the Central Bank following the decision to raise interest rates to 19%, have once again hit the Turkish economy, which has seen the lira lose 14% of its value against the dollar since March.

Turkey's President Recep Tayyip Erdogan has again meddled in the central bank's hierarchy, sacking one of the country's deputy central bank governors, the third senior official to be sacked in two months, in a series of interventions at the supposedly independent institution that has unsettled investors. Erdogan published a decree in the Official Gazette in the early hours of the morning, as he has done on previous occasions, dismissing Oguzhan Ozbas, a member of the Monetary Policy Committee (MPC), and replacing him with Semih Tumen, a presidential adviser and professor of economics at Ankara's TED University.

In March, the Turkish President dismissed the President of the Turkish Central Bank, Naci Agbal. The reason for his dismissal was due to the increase in the interest rate from 17 to 19 percent, a measure with which Erdogan did not agree, so he decided to replace him with the economist and politician Sabah Kafcioglu, with whom he shares ideology. This announcement triggered an 11% devaluation of the Turkish lira against the US dollar, as well as sparking criticism among economists and investors. Moreover, the international financial agency Moody's considered the dismissal to be detrimental to bank financing, as it damaged investor confidence in Turkey.

Just 10 days later, Erdogan intervened again in the central bank and dismissed the deputy governor, Murat Cetinkaya. The dismissal was also announced through the official state gazette in the early hours of the morning and without providing further details. Mustafa Duman, a former board member of Morgan Stanley, was appointed as the new deputy governor of the Turkish Central Bank.

On this occasion, and following the announcement of the dismissal of another deputy governor, the Turkish lira was little changed, a sign that investors have become accustomed to Erdogan's meddling in the bank. Only three of the seven committee members have remained in office for three years or more, the rest having been appointed from 2020.