The Turkish lira continues to touch record lows, the first of its kind, at a time when the Central Bank is trying to control its exchange rate against foreign currencies.
The lira continues its sharp decline since the beginning of last November, despite the fact that Turkish President Recep Tayyip Erdoğan dismissed Minister of Finance Lotfi Alwan from his position in early December, in a move to limit the deterioration of the national currency in his country.
Amid the decline of the Turkish lira against foreign currencies, Turkish opposition parties, including the two largest opposition parties in the country, the Republican People's Party led by Kemal Kılıçdaroğlu and the pro-Kurdish Peoples' Democratic Party, accused both the ruling Justice and Development Party and its main leader of mismanagement of the local economy.
Demonstrations also took place in the cities of Istanbul and Ankara a few days ago after the deterioration of the lira, which is what is happening for the first time, as thousands took to the streets to express their anger at the economic policies of the government led by the ruling Justice and Development Party in alliance with the Nationalist Movement Party. The security authorities arrested dozens of participants in those demonstrations.
Although the Turkish president appointed Nureddin Nebati as Minister of Finance to succeed Alwan, the Turkish lira, which lost more than 40% of its value during the current year 2021, is still recording record low levels against the US dollar, as it hit 15 lira this week and exceeded the 14 lira threshold more than once during this month and in November.
"This deterioration in the Turkish lira will continue if the government does not change its economic strategy and plans," said Cüneyt Akman, a Turkish financial and economic expert, expecting that "the lira will lose more value in the coming period if the central bank adheres to lowering interest rates."
The well-known financial expert added that "The government cannot attract foreign investors if it does not change its economic policies that it adheres to at the present time," noting that “The local population is trying to preserve their savings in foreign currencies only.”
Here is the full text of the interview that Majalla conducted by phone with Akman, who is residing in Turkey:
* In your opinion, how long will the Turkish lira continue to record losses against foreign currencies?
AKMAN: The current deterioration of the Turkish lira cannot end if the government does not develop new plans other than the ones it used in the past in vain. Of course, this sharp decline of the lira against foreign currencies cannot continue indefinitely. But the current currency crisis cannot be linked to economic factors only. There are also political factors that caused this.
* What are the record levels that you expect the lira to record against foreign currencies in the short as well as the long term?
AKMAN: In the short term, if we assume that the government adheres to lowering interest rates, this means that the value of one US dollar against the lira may easily reach 16 liras. As for the long-term, it may exceed 20 liras, but this level may need more time than the levels recorded by the lira in the past. However, if the government abandoned its policy of lowering interest rates, the exchange rate of one dollar against the Turkish lira might return to 12 or 13 liras.
Lira
* Can the losses that the lira is witnessing be described as a collapse?
AKMAN: After the government’s insistence on reducing the interest rate since last September until today, the lira began to record significant losses in its value, and as a result even the local population left the lira alone.
Bank deposits in foreign currencies are close to 60% for the first time in the country’s history. The lira is witnessing a danger based on people’s adherence to foreign currencies instead of the local currency, and this is not a complete collapse, according to my point of view at least.
* What is the fate of foreign investment in Turkey after the losses of the lira?
AKMAN: I do not think at the present time that the government will be able to benefit from foreign investment in Turkey if it sticks to its current plans. The investments that entered the country years ago are already leaving today after the value of the assets of foreign companies also declined due to the losses recorded by the lira against foreign currencies. As for the government's current economic policies, it will not be able to attract more investors.
