The year 2021 was the worst year for the Turkish lira, since President Recep Tayyip Erdogan came to power almost two decades ago, despite an appeal to the Turks, urging them to trust his atypical policies of lowering rates. interest in the face of rising inflation.
The lira, by far the worst of all emerging markets, collapsed in 2021, losing 44% of its value against the dollar over the year and 19% in the last week alone.
The crisis has accelerated in recent months, shaking a $ 720 billion economy. That is in largely due to Erdogan’s “New Economic Program” which focuses on exports and credit Despite the collapse of the lira and inflation that has jumped over 21%.
To mitigate the turmoil, the president presented a scheme two weeks ago in under which the state would protect the domestic deposits transferred from losses against hard currencies, which led to a sharp 50 percent increase in the value of the lira with the support of the central bank.
Erdogan, whose popularity polls show a drop in the run-up to the 2023 elections, called on Turks to keep all their savings in lire and to transfer gold to banks, claiming that market volatility was largely under control.
“As long as we do not base our currency, we are bound to sink. The Turkish lira, our money, is what we are going to go with, not this or that foreign currency,” he added.
“We are waging a war to save the Turkish economy from the cycle of high interest rates and inflation,” he said, reiterating his unconventional view that higher interest rates raise prices.
In reaction, the lira fell to the 13.63 level before recovering to end the day unchanged at 13.1875.
Savings of the Turks have shrunk in recent months due to the depreciation of the lira and hit an all-time low of 18.4 against the dollar last week, but recovered after the announcement of the government’s program to protect national deposits. from depreciation losses against foreign currency damage.
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