Under the influence of Corona .. Why did the dollar break the barrier of 7 Turkish liras?

Khalil Mabrouk - Istanbul

The rise in the dollar exchange rate against the Turkish lira did not come in light of the escalating economic crises globally under the influence of the spread of the Corona virus pandemic emerging "Covid 19", but the remarkable rise in the recent rise exceeded the 7 lira since the last Friday for the first time after the exchange rate crisis in 2018 .

The exchange rate of the Turkish lira has witnessed relatively stable during the last six months, as it closed in 2019 on the exchange rate of 5.94 pounds, but increased by 1.06 pounds this year, which represents 18% during the first four months of this year. 

Turkish official data show a very relevant link between the current exchange rate decline and the country's vulnerability to the spread of the Coruna virus, given the structural nature of the Turkish economy, which is thirsting for hard currency.

Export contraction
and researcher Abdullah Harb said that Turkey relies heavily on providing foreign currency on exports, a large part of which is manufactured from semi-primary raw materials imported from abroad, especially from Southeast Asia such as China and its neighboring countries.

Harb believes that the significant decline in imports due to the sharp decline in international trade movement and the disruption of most supply chains as a result of market closures caused difficulties in importing raw materials for manufacturing, which increased export problems.

Turkish official data show a significant decrease in the stock of "semi-manufactured" materials on the Turkish market, especially with regard to petrochemical products and supplies of electronic industries. 

The researcher at the University of "Special Qadeer" in Istanbul stated that stopping the movement of transportation, shipping and aviation between Turkey and the world threatens the contraction of exports and the devaluation of hard currencies, especially from the European Union, which represents the most important partner in trade exchanges with Turkey, which in 2019 received about 50% of Its exports. 

He pointed out in an interview with Al-Jazeera Net that the decline in foreign trade weakened the central bank's treasury reserves from the dollar, so demand increased and the pressure on the lira increased sharply again. 

Tourism and corporate debt
War confirms that the decline in tourism, which Turkey relies heavily on as a supplier of hard currencies to move the economy due to the closure of borders and controls of foreign movement, has increased pressure on the local currency. 

During the year 2019, 52 million tourists visited Turkey, and tourism receipts amounted to about $ 34.5 billion, representing approximately 12.1% of the Turkish GDP, which are indicators that are difficult to compensate even if the field is opened for travel and transportation again due to considerations related to the controls of movement and its limitations and the ability of tourists to resume travel activities.

Harb also sees that the hard currency in Turkey is closely related to the debts of Turkish companies, which have a total value of about 450 billion dollars, about a third of which is due in 2020, which makes it need to provide the hard currency, which increases the demand for it against the lira. 

The rise of the dollar
and war explains that the appreciation of the dollar in general represents the other side of the reasons for the high exchange rate against the Turkish lira, saying that the dollar has risen against most currencies since the beginning of the Corona crisis and its interactions. 

He pointed out that this is due to reasons related to the tendency of investors during the crises and the prevalence of fears to buy, store and keep the dollar as a reserve for the future as the first global currency. 

He said, "There is confidence that the dollar has become a store of value that people use to save and save money as a safe currency that maintains the greater part of its value in any crisis. This has increased the demand for it in the face of all currencies - including the Turkish lira - and led to it exceeding the seven-lira barrier again." 

Prospects and solutions
Turkish economic reports indicate that the options of the Turkish government in dealing with this rise in the exchange rate of the dollar against the lira are limited, given that the matter is related to a part of the global appreciation of the dollar, and the difficulty of predicting when life will return to normal.

An economic report in the Turkish newspaper "Sosjo" indicated that the government resorted to reducing interest rates in order to face the inflation that has risen, while unemployment has risen due to the measures it has taken to limit the spread of the Corona virus.

The report said that reducing the interest rate represents a incentive measure for investors to pump liquidity and establish investment projects that occupy the labor force in conditions of recession and natural deflation, indicating that the government succeeded in reducing the level of inflation, which reached 25% last year in this way, but that does not seem possible in light of a crisis As global as we live today.

The Turkish central bank last week cut the main interest rate by 100 points to 8.75% year on year, in an effort to continue stimulating the economy and reducing the consequences of the Corona virus pandemic. 

This is the fourth time that the Turkish Central Bank has cut interest rates since the beginning of the year, as it was cut last January to 11.25%, then 10.75% in February, and then to 9.75% in March, before it reached 8.75. %.