Ankara, 24 November 2021 (TDI): The currency has fallen sharply against the dollar 11 times in a row. Losing about 45% of its value this year, about half of that loss since the beginning of last week.
The Turkish people are struggling to cope with the confusing collapse of their currency and the leader of the opposition party said the country was facing a “catastrophic” crisis as the lira fell by 15% on Tuesday compared to the dollar.
Tuesday’s Decline: Lira
Tuesday’s decline follows weeks of a sharp fall in the lira that has already raised prices. Leaving ordinary Turkish people to reconsider everything from their holiday plans to buy groceries weekly. There has never been such a tragedy in the history of the Republic, said Kemal Kilicdaroglu, (leader of the opposition Republican People’s Party), who blamed a drop in funding for President Tayyip Erdogan, who has led the country since 2003.
Eskiden risk arttığında swap faizleri artar ve yerlinin aldığı dövizi yabancı satararak sistemi dengelerdi. Şimdi bu piyasa kuruduğu için bütün yük cari denge düzeltmesi üzerine biniyor. Bu süreci yumuşatacak olan döviz satışları da devrede olmayınca sert bir hareket yaşanıyor.
— Hakan Kara (@ali_hakan_kara) November 24, 2021
Right now, it’s basic. the national security issue of the Republic of Turkey, Kilicdaroglu added. Erdogan urged the central bank to cut interest rates on the move, saying it would improve exports, investments, and jobs, but critics said it would boost the two-digit inflation rate and destroy the lira, significantly reducing Turkish earnings. Shoppers at a central Ankara mall added that they could not take their eyes off the lira, which dropped to $13.45. Last year it was $8, last month it reached $9, and last week it hit $10.
Facing a 20% inflation rate
Former Prime Minister Ahmet Davutoglu, a founding member of Erdogan’s ruling AK Party before splitting up to form his own party, described the president’s economic actions as “rebellion and not ignorance”.
Kilicdaroglu, Davutoglu, and other leaders of the opposition groups called emergency meetings to discuss the currency after the major collapse of the lira. Bankers say the deficit is almost dry as on Tuesday it dropped sharply to 13.45 due to dollar purchases.
Many people in Turkey, who are already facing a 20% inflation rate, will panic over rising prices. Opposition politicians have blamed Erdogan for the crisis. Retailers are also struggling due to the chaos, as some websites are stopping the sale of electronic products.
— Hakan Kara (English) (@alihakankaraEng) November 20, 2021
A sales representative at the Apple store in Istanbul said people think of electrical appliances as an investment equal to the things they should use. “It’s a strange thing for the economy and everything, but people see it as a value store.
Erdogan defending Central Bank
Despite Erdogan defending the central bank’s monetary policy and vowing to win his economic war on independence. There is widespread criticism from those seeking a move to curb the slide, including high-ranking economists. There was no sign of any intervention to improve the currency. The central bank said it could only do so under certain extremely volatile conditions.
If steps are not taken urgently, the financial system cannot cope with this, Hakan said.
Erdogan pressured the central bank to move on to a more aggressive reduction cycle with a view to boosting exports, investments, infrastructure, and jobs. But many economists have described the downturn as negligence and opposition politicians calling for an immediate election.
The confusing inflation rate has boosted local budgets and future plans. Deviation from orthodox policies has a significant impact on the economy, said Selva Demiralp. Director of the Koc University TUSIAD Economic Research Forum and former U.S. economist Federal Reserve.
There is a downward spiral. But it will have a negative impact on the economy, he added. Commenting on the reduction in prices and the apparent indifference to the depreciation of the lira. Following a meeting between Erdogan and Central Bank Governor Sahap Kavcioglu, the bank issued a statement saying the selloff was unreasonable and completely different from the basics of the economy.
The central bank has lowered its price target by 400 points since September. Leaving the actual yield even worse as almost all other major banks have begun tightening monetary policy or preparing to do so.