Erdogan firing the head of Turkey’s central bank adds to mess: Naguib Sawiris

Turkey’s president who will fire the head of the central bank over the weekend will only increase the country’s “disorder,” Egyptian billionaire Naguib Sawiris said.

President Recep Tayyip Erdogan on Saturday sacked another head of the central bank, the third fired in two years.

During the five months of Naci Agbal, it 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 the higher rates will not solve economic problems in Turkey and is expected to comply with Erdogan’s orders.

“I anticipate 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 economic or financial issues.

“(Erdogan) wants someone to work on the basis of a political agenda, which is a recipe for disaster for central bankers,” he said. “Central bankers need to react to the economic realities of their country.”

The Turkish lira fell on Monday as the market reacted to the news.

The Turkish presidency office did not immediately respond to CNBC’s request for comment.

Sawiris also influenced Turkey’s foreign policy.

“(Erdogan) has taken a 180-degree turn now, and is trying to appease Egypt … improve its relations with Europe, etc.,” he said.

Earlier this month, Turkey said it had resumed diplomatic contact with Egypt. Relations between the two countries have been strained since the Egyptian army overthrew a president close to Turkey.

“I think it’s based on the new U.S. administration that is not so happy with their … behavior, buying Russian rockets, interfering throughout the Middle East with their troops and also supporting some … groups terrorists, “Sawiris said.

In addition, Egypt’s alliances with regional partners were not in favor of Turkey.

“Diplomats say this is not against anyone, no, it is against Turkey for its frantic behavior,” he said.

Erdogan’s attempts to “appease Egypt” are a “victory for Egyptian diplomacy,” Sawiris said.

“We don’t need more wars in the region, so I think it’s good,” he said.

Separately, Sawiris said the US under the Biden administration should renegotiate directly with North Korea on the nuclear issue, instead of asking for help from China.

“My advice is to do the same as Donald Trump at first. He called the management, sat down with them, went to visit and talked,” he said.

He acknowledged that discussions collapsed because the two sides could not reach an agreement on easing sanctions and denuclearization, but said such things can be negotiated.

“I don’t think the differences are too big. They can be fixed, but people just have to forget about the ego and who’s calling who first and so on, and just give them the respect they want,” said Sawiris.

He also said his view on oil reaching $ 100 has not changed.

“It’s very simple math … many producers have closed their production facilities once (oil prices) have reached $ 30 and are followed by all shale producers,” he said.

Sawiris also noted that some European countries remain closed and this influences oil demand and prices. Parts of Europe reintroduced blockade 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 killed competition and that prices would reach $ 100 in 18 months.

– CNBC’s Natasha Turak and Emma Graham contributed to this report.