National currency
Turkish lira continues to collapse after Erdogan’s statements
The Turkish lira continues to collapse after Erdogan’s statements. Photo: Sadat / XinHua / dpa
© dpa-infocom GmbH
The Turkish national currency continues to lose value. Even an intervention by the central bank gives only a short break. Background of the decay: statements by Erdogan.
The decline in the Turkish lira accelerated further. Turkish President Recep Tayyip Erdogan once again caused resentment among investors and thus further outflows from the currency.
The Turkish national currency sank to a record low after the president promised lower interest rates in an interview with the state broadcaster TRT on Tuesday evening until the elections planned for 2023. He is no longer interested in attracting short-term investments into the country with higher key interest rates. The lira then collapsed.
In return, the value of the US dollar rose to just under 14 lira, while the euro climbed close to 16 lira. For comparison: at the start of the week, 14 lira had to be paid in phases for one euro; in mid-November it was 12.
Another Erdogan statement
To support the lira, the Turkish central bank intervened and sold foreign currency for the first time in seven years – this has meanwhile brought the national currency a recovery. Erdogan fueled the decline of the lira again in a parliamentary group speech in Ankara. He spoke of “interest malice”. He also warned traders against hoarding goods in order to sell them later at a higher price: “We will – God willing – make sure that the country becomes a grave for hoarders,” he said.
Turkey’s currency has been on a downward slide for a long time, and the economy is suffering as a result. The background to this is, among other things, Erdogan’s interference in the monetary policy of the central bank. Contrary to common economic theory, the president takes the view that high interest rates promote inflation. Many central bankers who were more or less against Erdogan’s views have already had to take their hats.
Only recently, the Turkish central bank lowered the key interest rate to 15 percent – contrary to the common practice of countering high inflation by raising the key interest rate. The rate of price increase is currently around 20 percent. In this environment, foreign entrepreneurs tend to shy away from investing in the country, which puts an additional strain on the economy. The Turkish opposition leader Kemal Kilicdaroglu accused Erdogan of incapacity to lead on Wednesday. Last week there were protests against Erdogan’s economic policy in Istanbul and Ankara, among others.