It has been an absolute nightmare for Turkish people as the Turkish lira continues to suffer a historic downfall in recent times.
The currency which has already depreciated to a whopping 45 percent against the U.S. dollar, continues to plunge further by another 15 percent.
This drop-in valuation has surpassed the currency crisis which took place in 2018 after a combative speech by President Recep Tayyip Erdogan about his vision for the country.
The downfall started when Erdogan openly praised the interest rate cut by the central bank of Turkey calling it “fighting an economic war of independence.”
Enver Erkan, a financial analyst based in Istanbul stated “it’s like a horror film” as nobody knows how further the currency will depreciate as the policymakers of the country are willingly letting it fall further.
“The thing that would stop the freefall is some sign of an independent central bank in Turkey. But there’s not much prospect of that. Erdogan’s the type of guy who likes to keep doubling down,” stated Erkan.
Uday Patnaik, the Head of Emerging Market Debt at Legal & General Investment Management stated “this is the inevitable consequence of Erdogan’s war on rates.”
Erdogan praised the central bank for cutting down the high-interest rates despite several warnings from the economist and analysts that this will let the country plunge into inflation which is already at a high rate of 20%. This move will further depreciate and destabilize the lira.
Erdogan compared this financial struggle with the first World War which laid stone to modern-day Turkey in 1923.
“With the help of God and the support of our people we will emerge victorious from this war of economic independence,” he said.
The Central Bank stated that a cut in the interest rate is actually a move to stabilize the depreciating currency with an effort to let the country come out of the deficit it faces because of inflation.
The depreciation of the Turkish lira will also erode the living standards of the people of Turkey as the cost of goods will rise. This is a currency shock and the strategy is still unknown, yet the only one who will suffer is the general public of Turkey.