ANKARA -
Although Turkey achieved the highest monthly rate of exports and the treasury recorded a large surplus last May;
The Turkish lira continues to decline, so what are the reasons, and what is its future?
The Turkish lira fell to 17.19 against the dollar yesterday, Friday, in a continuous decline, heading towards record low levels recorded last December, after a series of unconventional interest rate cuts, and the Turkish currency lost about 23% of its value against its American counterpart this year after a decrease of 44% last year.
This comes at a time when Finance Minister Noureddine Nabati said - during a speech to members of parliament from the ruling Justice and Development Party - that his country is not considering reducing or raising interest rates in the near term.
Vegetarian also announced that the treasury recorded a surplus of 149.2 billion Turkish liras last May.
Turkey's exports last April amounted to $23.4 billion;
According to official data, it achieved an increase of 24.6% compared to the same month of the previous year, and the highest monthly level in history.
The reasons for the decline and the future of the lira
From Istanbul, the economist, Dr. Ahmed Mosbeh, stated that the Turkish lira lost a large part of its value in less than a month and abandoned the state of relative stability that was achieved in the past months, which reflects the fact that most of the economic measures were just palliatives.
He said, "The treasury surplus indicator - which means an increase in the volume of revenues than is predicted due to an increase in tax revenues or a reduction in expenditures - is important and positive, but it did not reflect on the stability of the lira for deeper reasons in the recent period."
Mosbeh added to Al-Jazeera Net, "The Turkish government's insistence not to raise the interest rate - despite the fact that the lira compensation bill has become exorbitant - as well as the signs of the military operation in Syria have increased pressure on the lira in the past few days."
"The reflection of the Russian-Ukrainian war on the prices of oil, grain and many basic commodities, in addition to the adoption of the policy of raising interest rates by most major countries and entities, contributed to the negative impact on the lira," he added.
The "inflation" price index in Turkey, last May, amounted to 2.98% on a monthly basis, and 73.50% on an annual basis (Getty Images)
The economist believes that the Turkish currency will continue to decline unless the interest rate is raised in line with inflation rates and the calming of markets, and unless the volume of control over markets and prices is increased.
In order to limit currency depreciation;
Mosbeh stressed the need to provide greater support for basic commodities so that the citizen feels the decline in inflation instead of raising salaries, which increases labor costs and therefore a greater increase in prices and an increase in consumer power that also causes prices to rise, in addition to the importance of reaching a settlement that ends the Russian war in Ukraine and thus the return of Gradual pricing.
Mosbeh reiterated that if the same conditions continue without treatment, it is expected that the Central Bank will raise its expectations to reach one dollar at 20 liras by the end of the year, especially since the expectations of the Turkish Central Bank rise from the current exchange rate by 3 or 4 liras.
vicious circle
for his part;
The economic researcher at the Ege University in Izmir, western Turkey, Dr. Muhammad Ibrahim, confirmed that since the economic shock of 2018 and the exchange rate of the lira continues to decline, and there is no end in sight for this decline, the lira crossed the threshold of 17 against the dollar is the level it almost reached before resorting to the economic model Which President Erdogan announced 6 months ago and is based on the mechanism of protecting lira deposits.
Researcher Ibrahim told Al-Jazeera Net, "This level is higher than the fair value (16.5 dollars) estimated for the pound by experts of the Institute of International Finance, and the reason is due to a large credit expansion that leads to an expansion of the current account deficit leading to a deterioration in the exchange rate, and the matter has become like a vicious circle.
He pointed out that the reality of the problem is deeper than the issue of interest, around which the discussion and even the conflict between the government and other parties, especially the opposition, were focused.
Pointing out that the deterioration of the value of the lira created structural problems in the Turkish economy, such as high inflation, high production costs, and so on.
The consumer price index "inflation" in Turkey, during last May, reached 2.98% on a monthly basis, and 73.50% on an annual basis.
This came in data published by the Statistics Authority, yesterday, Friday, indicating an increase in the producer price index, during May, by 8.76% on a monthly basis, and by 132.16% on an annual basis.
The consumer price index increased by 39.33%, and producer prices by 80.38%, compared to the rates of the last 12 months.