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How far will the Turkish lira’s fall ?

13 March 2015 13:52 (UTC+04:00)
How far will the Turkish lira’s fall ?

By Rufiz Hafizoglu

If earlier, the Turkish lira was considered one the most stable currencies in the region, on March 6, 2015, the national currency of Turkey hit its historical record, reaching 2.6862 Turkish lira to the dollar.

The official exchange rate for March 12 is 2. 6238 TRY / USD and taking this into account, one can say that the dollar has retained its status almost throughout the week.

The growth of the dollar rate in Turkey is assessed by the government as erroneous monetary policy. At the same time, Deputy Prime Minister for Economic Affairs of Turkey Ali Babacan said earlier that the central bank conducts right monetary policy. As one example of the changes in the economic situation, the deputy prime minister mentioned the growth of the dollar in a number of European and other countries.

At the same time, Babacan said Ankara is ready for any development of the economic situation both in the country and in the world.

Support of the head of the Central Bank Erdem Basci by Babacan in the Turkish media is assessed as the first split before the parliamentary election.

It was believed that after yesterday's trilateral meeting held between Erdogan, Babacan and Basci, the Turkish president would change his opinion regarding the growth of the dollar but that did not happen, as the president reiterated the belief that the growth of the dollar is due to high interest rates in the country.

Turkish president called for the Central Bank to cut interest rates again by explaining this by the fact that high interest rates in the country are a barrier for attraction of investments to different economic sectors.

Given the fact that parliamentary election will soon be held in Turkey, depreciation of the national currency is a serious threat to the ruling Justice and Development Party (AKP).

The Turkish authorities are well aware that the economic crisis can greatly affect the fate of the ruling party during the parliamentary election.

That’s at least because the ruling Justice and Development Party (AKP) has always been proud in its 13 year rule that the authorities were able to create a favorable economic situation in the country.

Another reason for pride of the AKP is the attraction of investors to the country that can be really considered one of the most important successes of the ruling party in Turkey.

It is interesting that the Central Bank of Turkey has not taken a single step to withstand the increase of the dollar for three weeks.

Already a number of economic analysts assessed the torpidity of the Central Bank of Turkey as a struggle for independence and at the same time it is considered that AKP wants to take economic power under control in addition to political power.

Given the inertia of the Central Bank and persistence of President Erdogan, one can say that economic tensions in Turkey will last until the parliamentary election.

It is not excluded that such events will lead to further growth of the dollar in Turkey while it is worth noting that the Central Bank of Turkey is still in a position to influence the growing rate of the dollar.

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