What you need to know about Turkey’s rival leader Ali Babacan

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Former Turkish economy minister Ali Babacan is emerging as a new rival to Turkish President Recep Tayyip Erdogan’s Justice and Development Party (AK Party).

Babacan has held several senior positions in the administration until his resignation in July earlier this year. On Tuesday, he announced that he plans to launch a new political party to challenge the AKP by the end of the year.

Babacan said that his new party, which is still unnamed, “will be a mainstream political movement.”

A long time AKP-insider, Babacan is seen as a steady hand for the country’s turbulent economy, having held the economy minister position from 2002-2007, before going on to serve as foreign minister and deputy prime minister.

Babacan’s announcement that he would challenge Erdogan’s leadership comes at a time when the Turkish economy is suffering.

The Turkish lira sank further into the doldrums this week after the country tested its new S-400 Russian-made missile system using American-made F-16 jets. The move added pressure to the economy amid speculations of an escalating dispute between Ankara and Washington.

The lira is down 8 percent this year, and expected to fall further, economists earlier told Al Arabiya English.

Adding to economic and political pressures, Turkey’s state-owned Halkbank, which US prosecutors have criminally charged with helping Iran evade sanctions, said last week it will challenge whether US courts can hear its case at all before it would a formal plea.

Erdogan has also upped political pressure on the central bank to slash interest rates further to ease inflation and encourage investors and consumers to spend. The central bank has already cut interest rates 10 percent so far this year to 14 percent.

The cuts have had some effect – inflation fell to 8.5 percent in October, its lowest level in almost three years.

Erdogan has sought to tap into nationalist sentiment and has suggested that citizens “leave the dollar” and convert their foreign currencies into Turkish lira, a move that would boost the local currency.

The economy slid into a recession for the first time in a decade last year coupled with the country’s ongoing economic woes, likely played an impact on Babacan’s decision to oppose Erdogan.