What happens if Türkiye’s finance minister resigns?

While rumors of Finance Minister Mehmet Simsek’s resignation have created a buzz in Türkiye’s political and economic circles, British economist Timothy Ash projected what might happen if these rumors were true – painting a grim picture for Türkiye’s economy.

What rumors say about Finance Minister Simsek?

Rumors gained traction after reports suggested that Simsek had resigned nearly two weeks ago and was persuaded to stay by Vice President Cevdet Yilmaz.

• Government response: These claims were debunked by the Presidency’s Directorate of Communication’s Center for Combating Disinformation, which dismissed the allegations as baseless and aimed at causing market instability.

• Simsek response: Minister Simsek himself denied the resignation rumors, emphasizing that he has not left his post and that the economic team continues to work diligently under President Erdogan’s leadership. He reassured the public that Türkiye’s economic stability and reform programs are yielding positive results.

Despite our denial, those who continue to spread these rumors cannot be acting in good faith. We will not allow false stories to impact our economy or markets. Please do not be misled.

Mehmet Simsek

• Legal action: In response to the growing speculation, Justice Minister Yilmaz Tunc announced that investigations had been launched against those responsible for spreading the false resignation rumors. The accusations are severe, with charges under the Turkish Penal Code and the Capital Markets Law for disseminating misleading information with the intent to manipulate the stock market.

Ash projects not so bright future for Türkiye, without Simsek

In the wake of these rumors, British economist Timothy Ash, known for his insightful analyses of Türkiye’s economy, penned a scenario detailing the potential fallout if Simsek were to leave his post.

Ash’s analysis centers on the critical role Simsek plays in maintaining Türkiye’s economic stability, particularly through his adherence to orthodox economic policies.

Ash warns that if Simsek resigns or is dismissed, the following could happen:

• Capital flight: The $20 billion in portfolio inflows that Türkiye saw last year could rapidly reverse, leading to a significant outflow of capital.
• Dollarization surge: There could be an accelerated shift toward dollarization, exacerbating Türkiye’s foreign currency challenges.
• Devaluation and crisis: The loss of foreign exchange reserves and a major currency devaluation could ensue, potentially triggering a systemic crisis affecting banks, bonds, and public debt.

Why orthodox economic policies vital for Türkiye?

Ash also highlights the importance of continued adherence to orthodox economic policies for attracting Gulf investment. He notes that without a stable macroeconomic environment, the much-anticipated Gulf funds might not materialize, further straining Türkiye’s economic outlook.

Who is Timothy Ash?

Timothy Ash is a Senior Sovereign Strategist at RBC Bluebay Asset Management in London.

With over 20 years of experience covering Türkiye as a professional economist, he is also an Associate Fellow at Chatham House‘s Russia and Eurasia Program and a Trustee at Crown Agents International Development.

Ash has held senior roles in emerging markets research at various international banks, including Bear Stearns, RBS, and Nomura plc. He has a Master’s in Agricultural Economics from Manchester University and has worked extensively across Eastern Europe and the former Soviet Union.