In eye of the storm, Turkey's new finance chief faces
credibility test
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[August 16, 2018]
By Humeyra Pamuk
ISTANBUL (Reuters) - Turkish Finance
Minister Berat Albayrak faces a key credibility test on Thursday when he
hosts a conference call with global investors to reassure them that
policy makers can contain the country's worst currency crisis since
2001.
Albayrak, President Tayyip Erdogan's son-in-law, was named finance
minister just over a month ago and is a relative unknown for
international investors, who fear Turkey's economy is increasingly
hostage to political interference.
The lira has lost nearly 40 percent against the dollar this year,
tumbling to a low of 7.24 on Monday, fueled in part by Erdogan's
relentless calls for lower interest rates despite soaring inflation. The
slump has led to fears of contagion across emerging markets.
Some 3,000 investors and economists have registered for Thursday's call,
due at 1300 GMT. Albayrak is not expected to take questions, but
investors will be looking for signs he has the strength to act
independently of his father-in-law.
"The big strike against him is his being Erdogan's son-in-law," said
Paul McNamara, an investment director at GAM London Limited. "Even if he
was the best man for the job, the optics are Third World."
The lira firmed 3 percent on Thursday ahead of Albayrak's presentation,
partly on the back of liquidity measures by the central bank to try to
stabilize the currency without resorting to an outright hike of its
benchmark interest rate.
Albayrak, married to Erdogan's daughter Esra, studied banking and
finance in the United States and worked for Turkish conglomerate Calik
Holding, seen as close to Erdogan's ruling Islamist-rooted AK Party. He
rose to become chief executive officer before entering politics three
years ago.
Within months he was elevated to the cabinet as energy minister. In
July, after Erdogan was re-elected with sweeping new executive powers,
the president named him to head the newly established Treasury and
Finance Ministry, putting him in charge of a portfolio previously
divided between two ministers.
Turkish academics and newspaper columnists who attended a briefing with
him in July portray Albayrak, 40, as well-equipped for the job of
steering the Turkish economy, casting him as hands-on and willing to
listen to contrary views.
International investors have so far been less convinced.
The lira lost nearly 3 percent within minutes of his appointment, with
investors worried by the departure of former deputy prime minister
Mehmet Simsek and former finance minister Naci Agbal, both seen as
market-friendly figures in a country pursuing increasingly unorthodox
economic policies.
"The issue here is that he lacks credibility," Piotr Matys, an emerging
markets strategist at Rabobank, said of Albayrak. "The market doesn't
want to give him the benefit of the doubt".
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Turkish Treasury and Finance Minister Berat Albayrak speaks during a
presentation to announce his economic policy in Istanbul, Turkey
August 10, 2018. REUTERS/Murad Sezer/File Photo
"CLOSER TO THE MARKET"?
Investors are likely to want to see more detail from him than he
delivered last Friday, when, from a hall in the ornate Ottoman-era
Dolmabahce palace on the shores of the Bosphorus, he outlined the
government's new economic plan in a powerpoint presentation to
Turkey-based bankers and business leaders.
He promised central bank independence, tighter budget discipline,
structural reform and "sustainable and healthy growth". But the lack of
detail or clear action worried markets.
In the presentation "he was dealing with the right issues" but was still
talking about future action, said Guillaume Tresca, senior emerging
markets strategist at Credit Agricole.
"But it's too long. We need something right now," Tresca said.
Albayrak has echoed Erdogan's assertion that the currency crisis is the
result of an "economic war".
But while he may be little known to foreign investors, he has held a
series of meetings in Turkey with business people, academics and civil
society groups since becoming finance minister.
Kerem Alkin, an economics professor and writer at the pro-government
Sabah newspaper, described him as "energetic and open to all kinds of
opinions", citing a meeting he held with a group of academics in late
July.
"He only made a short introductory speech and took notes tirelessly for
two and a half hours... He welcomed opinions from people not close to
the government," Alkin said.
Under constitutional changes that took effect after the July election,
the post of prime minister was scrapped, narrowing the circle of
influence around Erdogan, who has dominated Turkish politics for 15
years and who has branded interest rates the "mother and father of all
evil".
The last time Turkey's central bank held an emergency meeting to hike
rates, in May, it was then-prime minister Binali Yildirim who convinced
Erdogan of the need for drastic action, people familiar with the matter
said.
Whether Albayrak would be willing or able to do the same is an open
question for investors.
Erdal Saglam, a columnist for Hurriyet newspaper who attended a July
briefing with Albayrak, said the minister's thinking was "closer to the
market" than many people imagine.
"But given his situation (as Erdogan's son-in-law), how much room he has
to maneuver in implementing what he has in mind is difficult to gauge,"
Saglam told Reuters.
(Additional reporting by Claire Milhench in London; Editing by Dominic
Evans, Gareth Jones and Nick Tattersall)
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