Turkey’s former finance minister broke months of silence that followed his abrupt resignation by threatening legal action against critics who say his policies cost the nation more than $100 billion in reserves.
“There is no possibility of any foreign currency or lira resources of the central bank disappearing, evaporating or being transferred to a different location,” a lawyer for Berat Albayrak, who is also President Recep Tayyip Erdogan’s son-in-law, said in a statement published Saturday. Albayrak’s attorney said he’d sue detractors for 500,000 liras ($71,000) for defamation and donate the compensation to the families of fallen soldiers.
Turkey “conducted foreign currency transactions in a controlled and planned manner,” in an attempt to avoid disrupting the current account, he said. “There is no such thing as foreign currency evaporating or transactions that are against the law or unethical,” he said.
Erdogan rode to Albayrak’s defense on Monday, saying his title as presidential son-in-law “overshadowed his experience, efforts and success.” He also denied that the reserves were mismanaged.
After Albayrak took over as economy czar in July 2018, Turkey began spending foreign currency reserves to defend the lira during times of volatility. Goldman Sachs Group Inc. economists estimated the sales exceeded $100 billion last year alone.
The pace at which foreign-exchange holdings were eroded left Turkey’s economy more vulnerable to external shocks but also failed to stabilize the lira, which weakened to a record low just before Albayrak’s departure. The Turkish currency slid more than 40% overall during his tenure, making it the worst performer among major world currencies tracked by our reporters.
In recent months, Turkish opposition parties, led by the Republican People’s Party, or CHP, have ramped up criticism both of Albayrak’s policies and his “disappearance” since his unexpected resignation in November.
“The central bank’s $128 billion is gone but the ‘son-in-law’ responsible is at large,” the CHP tweeted over the weekend.
Ibrahim Turhan, a former official with the ruling AK Party who’s joined the opposition Future Party, denied that the reserves were spent wisely.
Albayrak’s departure three months ago was part of a broader overhaul of Turkey’s top economic policy team. Officials familiar with the matter told our reporters at the time the changes were driven by Erdogan’s own frustration over how the country’s reserves had been used. The reserve policy was executed by the central bank with strong backing from Albayrak’s ministry, the people said, as it sought in vain to stabilize markets without raising interest rates — in line with Erdogan’s disdain for high borrowing costs.
“If you spend your reserves to contain the exchange rate but it goes up to 8.5 from 5, then your reserves have evaporated,” Turhan — a former deputy central bank governor and chairman of Borsa Istanbul — said on Twitter, referring to the lira-dollar exchange rate.
Albayrak has drawn support from his successor, Lutfi Elvan, who said the foreign-exchange transactions were carried out “in line with the goal of financial stability” amid “extraordinary fluctuations in global markets.”
Turkey has delivered substantial interest-rate hikes since the appointment of Naci Agbal as central bank governor and his ally, Elvan. The moves have spurred a more than 20% rally in the lira as expectations grow that Turkey is returning to more orthodox monetary policy.