Erdogan sacking the head of Turkey’s central bank adds to the confusion: Naguib Sawiris

Turkey’s president sacking the central bank president over the weekend will only add to the “mess” in the country, said Egyptian billionaire Naguib Sawiris.

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 term, he raised Turkey’s interest rate by about 450 basis points, to 19%. Economists believe that rate hikes were necessary to control inflation and stabilize the lira.

Agbal’s replacement, Sahap Kavcioglu, said the higher rates will not solve economic problems in Turkey and that he must obey Erdogan’s orders more.

“I anticipate that this will only make the confusion worse,” said Sawiris, president and CEO of Orascom Investment Holding. “Inflation is very high and trying to lower interest rates when you want to defend your currency … it 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 who works on a political agenda, which is a disastrous recipe for central bankers,” he said. “Central bankers need to react to their country’s economic realities.”

The Turkish lira plunged on Monday, with the market reacting to the news.

The Turkish presidency’s 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 and so on,” 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 military overthrew a president close to Turkey.

“I think it’s based on the new US government, which is not so happy with its … behavior, buying Russian rockets, interfering across the Middle East with its troops and also supporting some … terrorist groups,” said Sawiris .

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

“You get a sweet talk from diplomats that this is not against anyone, no – it is against Turkey because of its frantic behavior,” he said.

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

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

Separately, Sawiris said the United States under the Biden administration should return to direct talks 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 at the beginning. He called the leadership over there, sat down with them, went to visit and talk,” he said.

He acknowledged that the discussions failed because the two sides were unable to reach an agreement on easing sanctions and denuclearization, but said these things could be negotiated.

“I don’t think the differences are very big. They can be overcome, but people just need to forget about the ego and who cares who first and so on, and just give them the respect they want,” said Sawiris.

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

“It is a very simple math … many producers closed their production facilities when (oil prices) reached the $ 30 range, and followed by all shale producers as well,” he said.

Sawiris also noted that some countries in Europe are still blocked and this influences demand and oil prices. Parts of Europe have reintroduced blockade measures amid a third wave of Covid infections.

“I still maintain my theory that … there is only one way and it will go up,” he said.

In May 2020, he told CNBC that the oil price war between Saudi Arabia and Russia killed the competition and that prices would reach $ 100 in 18 months.

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