In the wake of the recent arrest of Istanbul Mayor Ekrem Imamoglu, a prominent opposition leader, Turkey’s top economic policymakers are holding talks with global investors to reassure financial markets shaken by the news. Finance Minister Mehmet Simsek and Central Bank Governor Fatih Karahan will join a teleconference on Tuesday at 1 p.m. London time, organized by Citigroup Inc. and Deutsche Bank.
Imamoglu’s arrest Wednesday on charges of corruption and alleged membership in an outlawed terror group have fueled mass protests and caused extreme market volatility. The Turkish lira fell sharply to a record low of 42 against the US dollar before moderating. The country’s main stock exchange (Borsa Istanbul), saw its benchmark decline by 6.87%, prompting temporary halts in trade.
To cushion the economic blow, Turkish officials have done several things. The Central Bank raised its overnight rate in an emergency meeting on Thursday. About $11.2 billion was injected into the foreign exchange market on March 19 to support the lira. Short-selling in the stock market was prohibited for a month to limit speculative trading.
President Erdogan openly supported Simsek’s economic agenda, hghlighting that the government was set to maintain investor-friendly policies. The President declared, following a Monday cabinet session, that the government would not ruin the economic growth of the last two years.
Despite attempts by the government, protests persist in large Turkish cities, with more than 1,100 people arrested since the demonstrations started. Erdogan has described the protests as a wave of violence and blamed the opposition Republican People’s Party for causing the unrest.
Global reactions have been measured. US officials have otherwise remained mum on Imamoglu’s detention, with State Department spokesperson Tammy Bruce calling it a domestic judicial matter. Turkish Foreign Minister Hakan Fidan has otherwise been set to meet US Secretary of State Marco Rubio in Washington today.
The government’s quick interventions have been able to deliver some stabilization, with the lira stabilizing and Turkish bonds and stocks experiencing initial signs of recovery. Nevertheless, analysts note that long-term political instability might undermine such gains and scare off foreign investors. The investor call, scheduled in the near future, seeks to assure stakeholders of Turkey’s adherence to economic stability despite current political woes.
