ANKARA, Turkey: Turkish President Recep Tayyip Erdogan has pledged a new economic growth strategy based on stability, lower inflation and international investment, an abrupt shift in rhetorical gears that sparked a rally of up to 4% by the lira.
Erdogan said the strategy would be built on price, monetary and financial stability.
Turkey needs to rebuild both depleted foreign reserves and faith in the beleaguered currency, he said, seeking to burnish Turkey’s free-market credibility after its currency dropped to a series of record lows in recent months.
In a recent shuffle the head of the central bank was removed and the finance minister, Erdogan’s son-in-law, stepped down with little immediate explanation.
The comments, including Erdogan’s pledge to personally tell international investors about opportunities in Turkey, could mark a shift from a more combative tone since 2018 that in part blamed foreigners for a halving in the value of the lira.
The worst performer in emerging markets this year, the lira sank to a record low of 8.58 as recently as Friday. But it has rebounded more than 7% this week after the weekend departures of the two economic policymakers.
Former finance minister Naci Agbal was appointed on Saturday to lead the central bank and former Deputy Prime Minister Lutfi Elvan was named as finance minister late on Monday. Both are long-time AK Party members and close Erdogan allies.
In the first concrete step taken under the new leadership, the BDDK regulator on Wednesday relaxed banks’ limits on swaps and other trades in a move that lowers barriers to foreign investors who have sharply cut their holdings in recent years.
Foreign holdings of Turkish bonds have dropped to 3% from more than 25% five years ago in response to a 2018 currency crisis and a series of government policies and rules that complicated offshore hedging and shorting.
Last year Turkish state banks starved a London swap market of lira liquidity, drying up trade. Rating agencies have cited the unorthodox measures, including selling dollar reserves to support the lira, in a series of downgrades.