Zaher Albik-Ankara
The Turkish lira fell to its lowest levels since last May, after comments by the Turkish treasury minister indicated that the central bank may continue to cut interest rates, at a time when the Turkish army is preparing for more confrontations in Syria.
The lira fell 0.6% to 6.0275 pounds against one dollar in trading last Friday, before it compensated some of its losses in trading today, but it remained around the six-lira threshold for the dollar.
Last Friday, Turkey announced that it had completed a four billion dollar bond issue.
According to Bloomberg Agency, the reason for the recent depreciation of the Turkish lira is due to the positive announcement of US job data, which led to an increase in demand for the dollar, and thus its rise against other currencies, which was reflected in some currencies, including the Turkish lira and the Indian rupee.
| Ziraat Bank, the largest and oldest Turkish bank (Al-Jazirah) |
Based on previous experience in which the Turkish lira crossed the six-lira barrier of one dollar, observers expect the lira's price to continue falling to form a new stable threshold.
The ratings agency "Standard & Poor's" ranked the foreign exchange system in Turkey last week as a "managed float", a system that allows the central bank to intervene regularly in foreign exchange markets, in order to change the trend of currency float and support the balance of payments in periods of acute fluctuations .
But the economic researcher at the Aegean University of Izmir, Muhammad Abu Alian, assured Al-Jazeera Net that the Turkish lira has been following the free exchange system since 2000, meaning that it is subject to the forces of supply and demand, denying that it is subject to the managed exchange rate, as the fixed exchange rate of the lira was abandoned following the agreement With the International Monetary Fund at the time and obtain a loan from him in exchange for the implementation of his policies, after the economic crises in Turkey at the end of the nineties.
He pointed out that the lira in the last three years lost about 50% of its value, and this is not possible in the managed exchange rate, and that the Central Bank's interventions in the free exchange rate do not make it a managed system.
Abu Alyan attributed the reason for the recent sharp decline in the lira to the fact that the high rate of inflation and lowering the interest rate are pushing investors towards more feasible havens, including the dollar, which reduces demand for the Turkish lira, which indicates - according to the same spokesman - that the exchange rate continues to decline slowly during the period Coming.
Solution
Abu Alyan said that "Turkey, since the attempted coup in mid-2016, is living in a stage of uncertainty that is renewed with every internal or external political event, in addition to the strained political relations with the United States of America from time to time, which makes investments looking for more stable opportunities from the economy Turkish, and this increases the pressure of demand for foreign currencies against the lira, as well as the preference of residents in Turkey to transfer their savings or part of it to foreign currencies for fear of losing their value.
In response to a question about what can the Turkish authorities do to maintain the strength of its currency? The researcher Abu Alyan answered by saying that "the Turkish lira needs protectionism and reducing the dependence of the large Turkish economy on the outside world, through reducing indicators of commercial exposure, external debt, and the deficit of the trade balance and thus the current account, and the pressure of imports, especially luxury, and the application of financial, monetary and economic policies consistent with The reality of the economy, "adding that" the government must control public expenditures and resort to austerity in government spending. "
It is noteworthy that the regulatory authorities in Turkey tightened restrictions on speculation in the lira in order to reduce the decline in its exchange rate.
| An individual is conducting a financial transaction through the ATM of the governmental Waqf Bank in Turkey (Al-Jazeera) |
Economic confidence
In this context, Ahmed Ismail, an economic journalist with the Daily Sabah newspaper - close to the Turkish government - stated that in times of high confidence in the government the deposit rate in hard foreign currencies is low, but when confidence shakes, hard currencies become a safe haven.
"As of January 24 last, 51% of the deposits were deposited into foreign currency accounts, according to the central bank data. The rate fluctuated around 30% in the years of trusted governments, and it exceeded 40% when confidence weakened," Ismail told Al Jazeera Net. Despite President Recep Tayyip Erdogan's calls for citizens to trust the Turkish lira. "
Ismail added that the Turkish government worked to support the lira, in addition to imposing interest rate cuts, other methods were used to support them and curb foreign currency prices, and these interventions depended on foreign currency sales to state banks from the central bank reserves.
He noted the economic journalist in the Daily Sabah newspaper that Ankara has succeeded in controlling prices through this method so far, but this came at the expense of shaking confidence between the owners of domestic funds and foreigners.
Ismail stressed that the Economic Confidence Index - a composite measure derived from 20 indicators, which reflects the assessments and expectations of consumers and businessmen at the general economic level - reached 97 last January, which is better than the 82 points recorded in May 2019.
The lira fell 11% last year, partly due to the Turkish military incursion into Syria, bringing its losses over two years to 36%.