Erdogan said after a cabinet meeting on Monday that he wanted to ensure that citizens did not have to exchange their domestic currency, the lira, for foreign currency.
(Photo: via REUTERS)
Ankara Turkish President Recep Tayyip Erdogan has introduced a series of measures designed to prevent further dollarization of the economy. The steps should ensure that citizens would not have to exchange their domestic currency, the lira, for foreign currency, Erdogan said after a cabinet meeting on Monday. He gave the savers a deposit guarantee. Erdogan also initiated measures to support exporters and retirees in the face of the currency turbulence.
One speaks of dollarization when the national currency is partially or completely replaced in its functions. The main causes of such an exchange of the national currency are inflation and political uncertainties. After Erdogan’s speech, the lira rebounded against the dollar. Their price was last listed at 14.90 to the dollar after 18.40 previously.
Erdogan also stated that he does not want to move away from his new economic model, which is based on low interest rates. The central bank’s rate cut will depress inflation within months, he predicted. The inflation rate jumped to more than 21 percent in November.
In the coming year, according to forecasts by economists, the inflation should even reach 30 percent. This is mainly due to the decline in the national currency, which has lost more than half of its value against the dollar this year. This makes imports – of oil and medicines, for example – more expensive because they usually have to be paid for in foreign currencies such as dollars or euros.
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The experts also see the reason for the currency crisis and high inflation in the unorthodox monetary policy of the central bank. This has cut its key interest rate from 19 to 14 percent since September, although economists consider a significant increase to be the correct answer. Erdogan wants to boost exports, credits and growth in the run-up to the election in 2023.
More: The Turkish central bank cuts the key rate again – the lira falls to a record low.