After a week were the Turkish lira found itself in an unstable state, President Recep Tayipp Erdogan called on to his population and requested that they convert their savings from foreign currencies to their national currency.
This may be seen as a counter-intuitive request, since the lira has been plummeting this year, falling about twenty percent from its previous value and recently reaching a value as low as 4.93 to the dollar. That number did not last for long, since Central Bank was eager to raise its top interest rate, attempting to stabilize the currency. However, the incident did not go unnoticed: foreign investors were alarmed by the events and economists continued their prediction that, if Erdogan were to be re-elected in the upcoming elections, Turkey’s economy would be in an even worse state. The bank also announced that it would allow for some of the foreign currency debt to be paid in its equivalent for liras.
Addressing the situation while speaking to his supporters, Erdogan stated boldly: “My brothers who have dollars or euros under their pillow. Go and convert your money into lira. We will thwart this game together.” This makes mention to the commonly-referenced theory that the state of the lira was tampered by international unnamed forces, and Erdogan proceeded to state that “If the financial sector plays such games to work against our investors and entrepreneurs, know that you will pay a steep price.”
Although some of the shifts in the country’s economy and currency could be related to problems of any typical developing country, they have highlighted a set of systematic issues that are more strictly-related to Turkey and the way that it has been administrated as a country, such as high external debt and accumulated foreign currency debt.
This set of events comes short after Erdogan’s request of holding the presidential elections over a year before the scheduled date. This was speculated to have been fueled by the intention of avoiding a projected shake-up in the country, which could bring them to an economic and financial crisis. Erdogan’s campaign was set to be focused on the economic achievements of his 15-year administration of Turkey’s economy, and he had stated his intention of having even more dominance and control over the country’s economics and the Central Bank. All of these events were decided before the most recent changes in the currency and economic landscape of the nation, which makes the timing of Endrogan’s statements and requests rather inconvenient and could jeopardize his win.
The country’s ever-changing financial state has caused, as a consequence, that many people become much more opposed to another Endrogan term. Business leaders see the man as someone who has held the nation’s economy for too much time, and financial analysts and opponents believe that the changes in the lira’s value have been caused by Endrogan himself, since he did not respond to requests by banks and financial officers proposing to raise interest rates, which has been defined as necessary to ease the pressure on the country’s currency and lower its inflation, which is now over ten percent.
While arguing for his proposition to have more economic power in the future, Erdogan stated that it would be a way for him to be held accountable for his country’s state, proposing heavily for Turkey to have a presidential governing system. Several opponents of Erdogan have warned that this procedure could trigger an economic crisis. Former Central Bank governor and candidate for the Parliament Durmus Yilmaz has stated that “Turkey did try the exact same thing in 1994 and that’s how we ended up with a crisis”.
Besides from president Erdogan’s actions,another reason for the lira’s recent value drop is the fact that the United States Federal Reserve has raised interest rates, which has taken investors away from economies like the one from Turkey. Analysts have stated that an effective way to proceed would be for Turkey to also raise their interest rates.
