Turkish Lira Plummets As New Government Pursues Rational Policies

In a bold declaration, newly-appointed Finance Minister Mehmet Şimşek has stated that Turkey must make a radical shift in its economic policy to combat its escalating inflation. The announcement came during a press conference on Sunday, following Şimşek’s induction into President Recep Tayyip Erdoğan’s cabinet.

“Turkey has no alternative but to tread the path of rationality in its economic management,” asserted Şimşek. His primary focus, he added, would be “price stability,” emphasizing the critical need to reduce inflation to single digits over the medium term.

Turkey’s economy has been grappling with soaring consumer prices over the past two years. Official figures from October reported a staggering 24-year high inflation rate of 85.5 percent. However, independent analysts suggest that actual numbers may be significantly higher. The surging cost of basic commodities has been a major bone of contention in the recent presidential election run-off.

In the aftermath of his third successful term win, President Erdoğan appointed Şimşek, a former economist at Merrill Lynch and a key figure in Turkey’s recovery from the 2008 global financial crisis, as the Treasury and Finance Minister. This strategic move has been perceived as an indication of Turkey’s potential return to conventional economic policies.

Erdoğan, who had previously dismissed appeals to hike interest rates to curb inflation, citing religious reasons, now faces a delicate situation. Aura Sabadus, a researcher at the Center for European Policy Analysis, comments on Şimşek’s appointment, “His role is a tightrope walk. It’s undoubtedly good news for markets. But, it’s worth noting that Erdoğan had earlier dismissed two deputy central bank governors opposing his unconventional economic views.”

Karabekir Akkoyunlu, a lecturer at London’s School of Oriental and African Studies, predicts potential conflicts. “Şimşek believes that Turkey has no option but to return to rational economic policies, which raises questions about the previous irrational approach,” he pointed out.

Erdoğan’s large-scale expenditure, including free gas offers to households and public sector salary hikes, is expected to make way for austerity measures to balance the budget. Akkoyunlu added, “With the election over, the ‘campaign economy’ ends. It’s likely that Şimşek will push for austerity.”