Turkey under economic attack

The lira traded flat recently, holding the gains it made against the US dollar earlier after Turkey’s central bank increased interest rates and the government banned the use of foreign currencies in the country’s property market.The dual developments pushed the lira as high as 6.08 against the dollar and it traded flat later, standing at 6.03 to the dollar. The Turkish central bank raised interest rates to 24 percent, the biggest increase since Erdogan came to power in 2003, in an attempt to boost the struggling currency and control inflation.Turkish President Recep Tayyip Erdogan has blamed an economic “attack” for the country’s currency crisis.In a speech to officials from the ruling AK Party in Ankara, Erdogan said Turkey had “faced a heinous attack targeting the Turkish economy after a series of negative statements from the US about our country were used as an excuse”.He described the sudden fall in the value of the lira last month, when the currency reached more than seven against the dollar, as an “economic assassination attempt”.The lira has lost around 40 percent of its value this year amid growing international concern over the health of the Turkish economy and a damaging diplomatic dispute with the US.The inflation rate in Turkey rose to nearly 18 percent last month.In a separate development, Erdogan issued a decree that contracts in the country’s property market must be made in lira.The announcement in the government’s official gazette stated that current agreements in foreign currencies must be changed to lira in 30 days, putting an end to deals in dollars and Euros.The ban is the latest attempt by the government to boost the Turkish currency and discourage Turkish individuals and businesses from using the dollar in international trade and investment transactions. Erdogan has recently called on Turks to exchange their foreign currencies for lira.Earlier this month, the Turkish president told a business forum in Kyrgyzstan that the US had behaved like “wild wolves” and “using the dollar only damages us”.

“We need to gradually end the monopoly of the dollar once and for all by using local and national currency among us,” Tayyab Erdoğan

Turkey is involved in a diplomatic standoff with the US over the detention of an American evangelical pastor. Andrew Brunson is being held under house arrest in Turkey after he was charged with espionage and terrorism-related offences.

Published in Melange Intl. Magazine September 2018.


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