2023-06-08 05:08:36
The Turkish lira continued its decline once morest the dollar in recent days, despite the end of the election season, the period of political uncertainty, and the formation of a new government.
Yesterday, the lira lost more than 7.2% of its value, which is a large percentage compared to the positive indicators of the Turkish economy, whether related to the increase in the growth rate and the jump in exports, or cash flows, the decline in the inflation rate, the improvement in the confidence index and the recent oil discoveries.
With the continuous decline in the price of the lira, it is difficult to limit the reasons to two basic justifications that have been hesitating for months. The first relates to what is called within some semi-official circles the internal and external “targeting policy and conspiracies” once morest the Turkish state and its currency, and the fierce attack by international speculators and global investment banks in rejection of the policy of reducing The interest rate, for this reason might have been heard during the period leading up to the recent presidential and parliamentary elections.
Another valid justification is the attempt by external parties to push Turkey into the IMF trap and obtain loans from international creditors.
The second justification is that the Turkish government is deliberately devaluing the currency in order to attract more dollar revenues that make it in a comfortable position in terms of paying off the burdens of external debt and the import bill.
Another valid justification is the attempt of external parties to push Turkey towards falling into the trap of the International Monetary Fund and obtaining loans from international creditors, thus entering the country into a cycle of violent austerity measures, price increases and subsidy cuts.
But in general, the reason for the decline in the value of the lira cannot be attributed to the scarcity of foreign exchange, the lack of dollar liquidity in banks and markets, and the increase in demand. The Turkish Central Bank has foreign reserves estimated at regarding $112 billion.
Turkey’s foreign exchange earnings exceeded $320 billion in 2022, of which $254 billion is from exports alone and $46 billion from tourism, an increase of 53%.
Note that the dollar boom continues during the current year. Exports exceeded $101.7 billion during the first five months of 2023, and last month increased by 14.4% to reach $21.7 billion, marking the best May ever.
And tourism revenues in Turkey jumped 32% in the first quarter of this year, despite the devastating earthquakes that struck the south of the country last February.
We must look for logical reasons for the continued decline of the lira, far from the story of the conspiracy once morest the economy and the government, whether from countries that are hostile to Turkey or international financial institutions.
Therefore, logical reasons must be sought for the continued decline in the price of the lira, away from the story of the conspiracy once morest the Turkish economy and the government, whether by countries that are already hostile to Turkey or by international financial institutions, and here we can put forward several reasons, which may explain the current confusing situation at the level of politics monetary and financial.
The first reason is the increasing fears of the Turks regarding the continuation of inflation at its high level, which currently stands at regarding 39%, following increasing salaries by 45%, starting from next July. Here, speculation may have increased in the exchange market, and there has been a rush to buy dollars, gold, and the euro to preserve local savings. .
The second is the appointment of a new economic team for Turkey led by Muhammad Shemishk, Minister of Finance and Treasury, and it is expected that Hafiza Ghaya Arkan will join the team to be the first woman to hold the position of governor of the Central Bank of Turkey, and here the current governor, Shihab Qafji Oglu, who supports the policy of reducing interest and maintaining a high growth rate despite inflation.
This team has not revealed its cards in full yet, and the market has not tested the extent of its independence in making its decisions away from the interventions of the Turkish president, especially in the file of dealing with high inflation, managing monetary policy and determining interest rate trends, and is this team able to impose its opinion and raise the interest rate, which is what Contradicts the policy applied before, or maintains the non-traditional economic model?
The third reason is related to what was reported in the markets yesterday that the Turkish Central Bank abandoned the policy applied for a while, which tended to defend the lira and curb speculation on it by pumping dollar liquidity from foreign reserves, and here the market is waiting for any signals in this regard amid an increase in demand for the dollar. .
It is expected that the lira will continue its decline until the disclosure of the direction of the Central Bank and the Economic Group regarding dealing with crises, including high prices and currency erosion
The fourth of these considerations that should not be overlooked comes from abroad, where markets expect further increases in interest rates on the dollar by the US Central Bank, which puts pressure on the currencies of all emerging markets, especially for countries with high indebtedness.
In light of these and other considerations, it is expected that the lira will continue its decline until the disclosure of the direction of the central bank and the economic group regarding addressing the most prominent crises, including high prices, currency erosion and an increase in the cost of living, and how to maintain an acceptable standard of living in light of high inflation, and which economic models will favor Turkey In the next stage?
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