ISTANBUL — A deputy chair of Turkey's ruling AK Party resigned following allegations of improper trading activity, adding political risk to a nation already battling a 65 percent year-over-year inflation rate and a 28 percent depreciation of the lira against the U.S. dollar.
The timing deepens pressure on sovereign debt markets. Credit spreads on Turkish government bonds are expected to widen as investors reassess political stability. For bondholders, the move increases duration risk—existing positions face both mark-to-market losses from spread widening and heightened rollover uncertainty for new issuance.
Turkey's Central Bank maintains a 40 percent benchmark policy rate, elevated but increasingly insufficient to anchor lira expectations if political commitment to monetary discipline wavers. Foreign investors have largely abandoned Turkish assets, citing both macro instability and policy predictability concerns. A resignation tied to trading impropriety directly undermines the institutional credibility needed to rebuild that confidence.
Local elections are scheduled for March. The resignation complicates the AK Party's efforts to project unified governance during a critical electoral period, when demonstrating economic competence is essential for voter confidence.
