Turkey’s new finance minister in the eye of a storm

When Turkey’s new Finance Minister Nureddin Nebati was asked last month to give details of an initiative to stem a collapse in the lira, he found a novel way to explain his strategy.

“I won’t give a number now,” he told a surprised television interviewer. “Can you look into my eyes? What do you see?… The economy is the sparkle in the eyes.”

For the man picked by President Tayyip Erdogan to oversee and articulate his unorthodox economic policy of driving down interest rates in the face of spiralling inflation and a tumbling currency, the response was characteristically unconventional.

Six weeks into the most high profile job in Erdogan’s cabinet, combining the finance and treasury portfolios, the 58-year-old minister has baffled markets with remarks on issues ranging from the inflation outlook to the US Federal Reserve.

“We have put aside orthodox policies, now it is heterodox policies,” Nebati told businesses two weeks ago, referring to the rate cuts, which run counter to mainstream economic theory that fighting inflation requires higher rates, not lower.

“We will move not on a path drawn for us by others but on our own path,” he said in one of many speeches and television interviews he has made since taking the job.

Government critics, including opposition politicians and foreign economists, say that path spells danger for Turkey, and that Erdogan had further unsettled markets by appointing Nebati.

“Instead of instilling confidence in the economy, you took steps that petrified everyone,” the leader of the nationalist IYI Party Meral Aksener said, addressing Erdogan. “As our nation is hit, the ‘Nebati Comet’ you brought to the helm of the economy…shamelessly speaks of the ‘sparkle in his eyes’.”

Even some sources close to the government have expressed concern, saying Turkey could have picked a more market-friendly figure to run the economy at such a turbulent time.

Nebati could not be reached for comment and a Finance Ministry spokesman did not respond to questions about the minister’s role. Erdogan’s office did not immediately respond to a request for comment.

Turkey’s lira has fluctuated wildly in the past weeks, hitting a record low of more than 18 to the dollar last month, before recovering to just over 10 and then settling at current levels just under 14 to the US currency.

A senior official from Erdogan’s AK Party said Nebati took office when the global economy was “in a difficult place” and had implemented new regulations, was working closely with the president, and had stemmed the collapse of the lira.

“Some pessimistic comments are being made, and I don’t think Nebati deserves this,” the official said.

Nebati has made several startling statements since his appointment, wrongly saying that the US Fed is owned by five families. He also said Turkey had entered a “positive vicious circle.”

Asked about a huge recovery in the lira after Erdogan announced last month that deposits could be protected from currency fluctuations, Nebati insisted state institutions had no role in the spike, even though official data points to significant interventions during December.

Central bank figures showed its foreign currency holdings dropped nearly $20 billion last month. Although the bank did not declare any dollar sales on the day the lira surged, analysts say half of the reserve drop was the result of backdoor interventions.

An AKP parliamentarian said Erdogan did not believe the deposit protection scheme had been clearly explained by Nebati and the government as a whole, and was concerned that although it boosted the lira, the early impact had stalled.

Nebati, however, has said demand for the scheme has been strong and that inflation will peak this month, before falling to single digits before elections scheduled for mid-2023.

Born to an Arab family from the al-Naim tribe in southern Turkey, near the border with Syria, Nebati studied political science and went into the family’s textile business.

He served as board member of MUSIAD, an association of religiously oriented businesses close to Erdogan’s government, and as a lawmaker for the ruling AK Party.

He was appointed deputy finance and treasury minister in September 2018, serving under Erdogan’s influential son-in-law Berat Albayrak who officials say he was close to.

He stayed on after Albayrak’s dramatic 2020 resignation, and took over as minister last month after the resignation of Lutfi Elvan, the last prominent figure in Turkey’s cabinet or central bank seen to favor orthodox economic policy.

A business person who had dealings with Nebati during his time as deputy minister described him as an extrovert and a “storyteller” who has little direct economic training.

Nebati would sometimes stand in for Albayrak to meet foreign executives looking to invest in Turkey. On one occasion, Nebati “avoided an executive’s queries and instead told stories of his childhood,” the business person said, adding that the executive left without making any investment commitments. [Reuters]