The Turkish lira continues to fall

The lira has lost 25% of its value in 2020, in what would be its eighth year of decline, according to Bloomberg. On 31 December 2010, the exchange rate stood at 1.5439 lire to the dollar; almost a decade later, the dollar is exchanged at 7.659 lire, somewhat lower than the peak of 6 November, when the exchange rate reached 8.7593 lire.

Turkey's misguided economic policy of the last few years has led Ankara to take drastic decisions that are highly disputed by the country's political and economic elite. Among these measures was the sale of 10% of the shares of the Istanbul Stock Exchange to Qatar just a few weeks ago.

Erdogan has also carried out changes in the Turkish Central Bank to try to stop the fall of the lira, but the continuous interference in the decisions concerning the economic policy has prevented the successive governors from carrying out their work with full freedom considering the situation Turkey was facing.

Among the possibilities is to raise the interest rate by 1.5% to 16.5%, Reuters reported this morning. The new sanctions by the United States and the European Union are taking a heavy toll on the Turkish economy, which, according to the opposition, will allocate 20% of tax revenue to pay for the interest generated by the loans.

The new governor of the Turkish central bank and former finance minister, Naci Agbal, has taken up his post in the knowledge of the complicated situation the country faces. To this must be added the uncertainty generated by the coronavirus, which makes it impossible to predict an optimistic outlook for the evolution of the Turkish economy.

Naci Agbal has announced different measures to try to reverse the situation and the free fall in which the lira finds itself, but the latest data reflects that the markets have serious doubts that these will be sufficiently drastic and ambitious measures to reverse the negative trend.