The Turkish currency fell to a new record low of less than 29.7 liras to the dollar on Tuesday, continuing a series of losses that accelerated slightly in late 2023, as it ended the year down about 37 percent.
Since President Recep Tayyip Erdogan won a new presidential term last May, the government has made a radical shift in monetary policy and abandoned the policy of unconventional low interest rates in favor of monetary tightening. The lira fell sharply last summer, with the authorities loosening their grip on the currency, before… Declines slow in the fall.
Lira deposits program protected in foreign currencies
Meanwhile, Turkish Treasury and Finance Minister Mehmet Simsek said, “The country plans to end the lira deposit program protected in foreign currencies in the new year.”
He added in a post on the social media platform “X” that “the year 2024 is the year in which annual inflation begins to decline, the adequacy of reserves increases, the foreign exchange protection system ends, permanent improvement in the current account begins and financial discipline is established,” adding that “it will be a year in which… Promoting sustainable high growth.
read more
This section contains related articles, placed in the (Related Nodes field)
It is noteworthy that the huge program (the Lira Deposits Program protected in foreign currencies), also known as “KKM”, was launched in December 2021 with the aim of reversing the trend of dollarization (keeping the dollar as a store of value) in deposits and strengthening the Turkish currency.
As for the losses of the lira since the beginning of the previous term of the Turkish President, the national currency has lost more than 85 percent of its value against its American counterpart, as the dollar exchange rate jumped from the level of 4.48 lira during June 2018 to 29.70 lira at the present time, reaching gains. The Green Paper has increased by more than 558.4 percent over the last five years, with an average annual gain of close to 70 percent.
Türkiye’s rating downgraded
In August 2023, Moody’s lowered Turkey’s rating to “B3,” citing “balance of payments risks,” while Fitch lowered Turkey’s sovereign debt rating to “B” last July due to fears of high inflation. .
A few days ago, the Turkish Central Bank raised its expectations for inflation rates to 65 percent by the end of 2023, compared to previous, more optimistic estimates of 58 percent, amid expectations that inflation will reach 36 percent by the end of 2024, compared to previous figures of 33 percent, reaching 14 percent. percent by the end of 2025 on an annual basis.
It is noteworthy that the unconventional policies followed by Erdogan during the past years caused a sharp decline in the value of the lira, which pushed inflation to the highest level in 24 years.
The authorities tried to support the currency by confronting the demand for foreign exchange and introducing a plan to protect deposits in lira from the decline in their value against foreign currencies, in addition to the worsening unemployment rate.
The appointment of Mehmet Simsek, who is highly regarded by financial markets, as Minister of Finance, and the appointment of a former US banker as governor of conservative pillars of the central bank, have supported expectations of a return to traditional policies.
2024-01-02 15:22:31
#Turkish #lira #welcomes #historic #decline
