SULAIMANI — Turkey’s lira was on track for its worst year since Turkish President Tayyip Erdogan came to power two decades ago, despite his appeal on Friday for Turks to trust his unorthodox policies of slashing interest rates in the face of soaring inflation.
The lira – by far the worst performer in emerging markets in 2021, as it was in previous years – is on a five-day skid in which it shed 20% against the dollar.
It is down 44% on the year largely due to Erdogan’s “new economic programme” focused on exports and credit despite the currency devaluation, which accelerated into a full-blown crisis in the last couple of months, rattling the economy.
To ease the turmoil, the president unveiled a scheme last week in which the state protects converted local deposits from losses versus hard currencies, sparking a 50% rally in the lira with the support of the central bank.
On Friday, Erdogan – whose opinion poll ratings are sliding ahead of an election in 2023 – called on Turks to keep all their savings in lira and shift gold savings into banks, saying the market volatility was largely under control.
“As long as we don’t take our own money as a benchmark, we are doomed to sink. The Turkish Lira, our money, that is what we will go forward with. Not with this foreign currency or that foreign currency,” he told a business group.
“For some time, we have been waging the battle of saving the Turkish economy from the cycle of high interest rates and high inflation,” he said, reiterating his unorthodox view that high rates raise prices.
In response the lira extended losses, weakening as much as 1.4% to 13.414 against the dollar in thin trade, down 20% from the end of last week. It stood at 13.27 at 1340 GMT.
The lira crisis has badly eroded Turks’ savings and earnings and the record volatility has upended the budgets and future plans of both households and businesses.
The currency has whipsawed from 18.4 to 10.25 versus the dollar in the last two weeks alone, and is set to log its worst year since 2001, when the International Monetary Fund lent support to stem a crisis.
(Esta Media Network/Reuters)
