The sources said that Erdogan’s decision to dismiss the head of the Central Bank this month came hours after he received briefings about the economic situation, which they described as fragile, adding that it was this sudden step that led his son-in-law to resign from the position of finance minister.
According to four sources familiar with the incidents, Naji Aghbal was promoted to the presidency of the Central Bank after he and other senior members of the main Justice and Development Party warned of a sharp decline in foreign reserves.
Sources’ testimonies shed an important light on the sudden economic transformation that took place during the weekend between November 6 and 9.
Meanwhile, as investors try to explore what Erdogan described as a new economic era, the lira rose ten percent upon its announcement, and then returned and fell five percent this week.
The briefings that Erdogan received over a period of two days before making his decision on Friday, the sixth of November included a warning against failure to secure new foreign financing from abroad, and pressures from the 30 percent decline of the lira since January and due to the Corona pandemic, according to sources. .
The anxious president summoned then-central bank governor Mourad Oissal that Friday to ask him how foreign exchange reserves had declined by more than half this year and about his plans to rebuild them.
One of the sources, who is close to the ruling Justice and Development Party circles, said, “The dismissal of Awsal and the appointment of Agbal took place within hours.”
The following Sunday, Erdogan’s daughter-in-law Baraat Albayrak resigned from his position as finance minister.
A second source said that Erdogan was informed of concerns among businessmen about a “massive wave of unemployment” as soon as the government lifted the layoff ban imposed due to the Coronavirus.
Last week, the central bank headed by Aghbal decided to raise the interest rate by 475 basis points, in the largest move of its kind in more than two years.
However, the currency’s decline this week indicates that the challenges that Turkey faces in implementing economic reforms are still significant.
Economists say that it was Erdogan’s repeated calls to cut interest rates that limited the ability of the central bank to contain inflation, and forced it to withdraw from dollar reserves to support the local currency.
Three of the sources said the president was misled.
“Erdogan was not regularly informed of the economic situation,” the first source said. “He was always getting elegant information from one side.” A third source said that he had received a promise in the past that reserves and the pound would recover.
Al-Bayrak posted his resignation in a post on Instagram, and the presidency did not confirm it for more than 24 hours.
Al-Bayrak justified his decision on health reasons, but his resignation came after he was not invited to attend two meetings held over the weekend headed by Erdogan and the Vice President, according to the second source familiar with the matter.
The Finance Ministry declined to comment on the rapid change in which Lotfi Alwan, a senior politician in the Justice and Development Party, replaced Albayrak.
The fourth source told Reuters that some party members recently had “feelings of resentment and marginalization,” but now they have “active roles.”
The shift came just before the imposition of new restrictions over the weekend to contain the Corona virus, which is expected to curb the economy, and after Joe Biden won the presidency of the United States, which heralds tense relations with the United States.
Attila Yesilada, an analyst at Global Source Partners, said influential voices had convinced Erdogan that “catastrophe was imminent.” “They urged him to reassess the situation on the ground and the chances that his regime will survive the crisis,” he said.