The fact that Turkey’s president fires his central bank chief over the weekend will only compound the “mess” in the country, Egyptian billionaire Naguib Sawiris said.
President Recep Tayyip Erdogan fired another central bank chief on Saturday, the third to be fired in two years.
During Naci Agbal’s five-month period, he raised Turkey’s interest rate by around 450 basis points to 19%. Economists believe that rate hikes were needed to control inflation and stabilize the lira.
Agbal’s replacement, Sahap Kavcioglu, has said that higher rates will not solve the economic problems in Turkey and is expected to better comply with Erdogan’s orders.
“I predict it will only add to the mess,” said Sawiris, president and CEO of Orascom Investment Holding. “Inflation is very high, and trying to lower the interest rate when you want to defend your currency … is not the right decision,” he told CNBC’s “Capital Connection” on Wednesday.
Sawiris added that it is not a good idea to mix politics with economics or finance.
“(Erdogan) wants someone who works on the basis of a political agenda, which is a recipe for disaster for central bankers,” he said. “Central bankers have to react to the economic realities of their country.”
The Turkish lira tumbled on Monday as the market reacted to the news.
The Turkish presidential office did not immediately respond to CNBC’s request for comment.
Relations with Egypt
Sawiris also intervened in Turkey’s foreign policy.
“(Erdogan) took a 180-degree turn now, and he’s trying to appease Egypt … improve his relations with Europe and so on,” he said.
Earlier this month, Turkey said it has resumed diplomatic contact with Egypt. Relations between the two countries have been strained since Egypt’s military toppled a president close to Turkey.
“I think it is based on the new administration of the United States, which is not so happy with its … behavior, buying Russian rockets, interfering throughout the Middle East with its troops and also supporting some … terrorist groups,” Sawiris said.
Egyptian billionaire Naguib Sawiris, CEO of Orascom Telecom.
Simon Dawson | Bloomberg | fake images
Furthermore, Egypt’s alliances with regional partners did not favor Turkey.
“You get sweet words from diplomats that this is not against anyone, no, it is against Turkey because of their frenzied behavior,” he said.
Erdogan’s attempts to “appease Egypt” are a “victory for Egyptian diplomacy,” Sawiris said.
“We don’t need any more wars in the region, so I think it’s good,” he said.
Do what Trump did
Separately, Sawiris said the United States under the Biden administration should return to direct negotiations with North Korea on the nuclear issue, rather than asking China for help.
“My advice is to do the same thing that Donald Trump did in the beginning. He called the leaders there, sat down with them, went to visit them and spoke,” he said.
He acknowledged that the discussions failed because the two sides could not reach an agreement on sanctions relief and denuclearization, but said these things can be negotiated.
“I don’t think the differences are too big. They can be bridged, but people just have to forget about the ego and who calls who first, and so on, and just give them the respect they want,” Sawiris said.
Oil at $ 100
He also said that his opinion on oil reaching $ 100 has not changed.
“It’s very simple math … many producers have shut down their production facilities once (oil prices) hit the $ 30 range, and followed by all shale producers as well,” he said.
Sawiris also pointed out that some countries in Europe are still locked in and that influences oil demand and prices. Parts of Europe reintroduced lockdown measures amid a third wave of Covid infections.
“I still hold my theory that … there is only one way, and it will increase,” he said.
In May 2020, he told CNBC that the oil price war between Saudi Arabia and Russia ended competition and that prices would hit $ 100 in 18 months.
– CNBC’s Natasha Turak and Emma Graham contributed to this report.