64 Finance & economics The EconomistNovember 14th 2020
1F
or someonethought to be the second-
most-powerful person in Turkey and a
possible successor to President Recep Tay-
yip Erdogan, it was an unseemly exit. In a
statement posted on Instagram on Novem-
ber 8th and riddled with grammatical mis-
takes, Berat Albayrak, the president’s son-
in-law, said he was stepping down as fi-
nance minister and leaving politics. It took
Mr Erdogan and his officials over a day to
digest and confirm the news. It took anoth-
er day to name Lutfi Elvan, a former deputy
prime minister, as his replacement.
Mr Albayrak, popularly referred to as
the damat(son-in-law), said he was leaving
for health reasons. But insiders blame a
feud with the new central-bank governor,
Naci Agbal, who had criticised the minis-
ter’s record. Mr Agbal had been appointed
only a couple of days earlier, after Mr Erdo-
gan ousted his predecessor, Murat Uysal,
without giving an explanation. (Mr Uysal is
the second head of the central bank to be
sacked in as many years.) Mr Albayrak was
reportedly not briefed on the decision.
Mr Albayrak’s management of the econ-
omy was even worse than his grammar. As
the minister and his father-in-law leaned
on both the central bank and commercial
lenders to keep borrowing rates low, the
lira set one record low after another. Be-
tween the damat’s surprise appointment in
2018 and his shock resignation, the curren-
cy lost 46% of its dollar value, eating away
at Turks’ buying power. Instead of raising
interest rates the central bank sold dollar
reserves to relieve pressure on the lira. It
threw in the towel this summer, but only
after squandering more than $100bn, and
had begun to use a byzantine system ofmultipleinterestrates to tighten the mon-
ey supply indirectly. For his part, Mr Albay-
rak laughed off concerns about the curren-
cy collapse. “For me, the exchange rates are
not important at all,” he told reporters in
September. “I don’t look at that.”
Investors hope for a return to more or-
thodox policies. In its first few days of trad-
ing since the shakeup, the lira had risen by
over 7% against the dollar, reversing a long
decline (see chart). Both Mr Elvan and Mr
Agbal, who preceded the damat as finance
minister, are staunch allies of Mr Erdogan,
but experienced technocrats. Both say they
will prioritise fighting inflation, which in
October approached 12%, almost two per-
centage points higher than the policy inter-
est rate. Mr Agbal is said to have already be-
gun removing Mr Albayrak’s surrogates
from top posts at the central bank and
promised to improve communication. In
another encouraging move, on November
11th the banking regulator eased restric-
tions on lira trading by foreigners. The
curbs had been imposed to stop outsiders
short-selling the currency.
Still, for all of Mr Albayrak’s foibles, the
damatonly did what all ministers are now
used to doing: follow Mr Erdogan’s lead.
And the president gives no sign of being
ready to loosen his grip on the finance min-
istry and the central bank, or to dispense
with his bizarre economic views, such as
that high interest rates cause inflation.
“There’s this narrative building that pins
all the bad things that happened since 2018
on Mr Albayrak,” says Erik Meyersson of
Handelsbanken. “Maybe it was his strategy
to start selling foreign reserves, but the rea-
son they resorted to this stupid measure
was because they had this stupid directive
[from Mr Erdogan] not to increase rates.”
The central bank’s monetary-policy
committee convenes on November 19th. It
“needs to meet expectations by hiking
rates and simplifying the policy frame-
work”, says Hakan Kara, a former chief
economist at the bank. If not, the change at
the top will have been window-dressing. 7ISTANBUL
Will a shakeup at the finance ministry
and central bank win over investors?Tu r ke yComings and
goings
Losing purchase
TurkeySource:RefinitivDatastream98762020Lira per $
Inverted scale25
20
15
10
5
0
2019182017Consumer prices
% increase on
a year earlierBerat departsT
he harvestrush in America’s heart-
land is subsiding. More than 90% of the
country’s corn and soyabeans had been
picked by November 8th. Crops moved
from cart to trailer to grain elevator. Now a
different kind of frenzy is taking hold.
Exports of American corn are poised to
reach a record of 67.3m tonnes for the mar-
keting year that began in September, ac-
cording to forecasts by the United States
Departure of Agriculture (usda) published
on November 10th. Demand for corn and
soyabeans may push American stocks to
their lowest levels in seven years. By the
time markets closed after the usda’s re-
port, the most actively traded corn and
soyabean futures contracts had jumped to
$4.23 and $11.46 a bushel, respectively, with
corn up by more than a third since early Au-
gust and soyabeans at their highest price in
over four years. They may rise higher still.
The surge in prices follows years of tur-
moil for American farmers. Gripes include:
the government’s limit on the ethanol that
can be blended in petrol; President Donald
Trump’s trade war with China; and the co-
ronavirus, which depressed demand for oil
and therefore the biofuels mixed with it.
Prices are climbing, in part, due to bad
weather. Wet conditions prompted some
American farmers to forgo planting and
collect government crop insurance in-
stead, notes Dan Basse of AgResource, a re-
search firm. Other farms suffered a dry Au-
gust. A derecho, or wind storm, blasted
across the Midwest, with gusts of more
than 100 miles per hour. Farmers else-
where have also experienced dismal condi-
tions. Usually fertile fields near the Black
Sea are producing less corn than expected.
Production in Ukraine is expected to fall by
more than 20% compared with last year.
Meanwhile demand from China has
soared. In the first phase of Mr Trump’s
trade deal, announced in January, China
agreed to buy an additional $200bn-worth
of American goods in 2020-21. Even with-
out the deal, Chinese demand for crops
would probably have been robust. The
country is keen to expand its herds of hogs,
decimated last year by African swine fever.
That is raising demand for animal feed,
such as soyabeans. Anxiety about food se-
curity means the government is refilling
stockpiles, too. The usdaexpects Chinese
wheat imports to reach the highest level in
25 years, with total imports of corn and oth-
er coarse grains setting a new record.NEW YORK
Demand for American grain is surgingCommoditiesAmber wave