December 6, 2022

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Inflation in Turkey: The political war for the lira

Status: 07.01.2022 03:46 am

Just before Christmas, the Turkish lira fell sharply. Government critics suspect that the curriculum was manipulated from the context of President Erdogan. Opposition parties have stated they will not run in the by-elections.

By Karin Sense, ARD-Studio Istanbul

On December 20, the Turkish currency will go on a rollercoaster ride. At first it crashes during the day, for a US dollar you have to pay more than 18 lira in the meantime. Later in the evening, Turkish President Recep Tayyip Erdogan announced the rescue package. At night the lira won again. One US dollar costs a good 13 lira.

Karin Sense
ARD-Studio Istanbul

The Turkish opposition sees this as highly questionable. “We want to know who bought and how much foreign currency was sold,” said CHP party leader Kemel Kliktroklu. “Who made the speculative profit? Who knew in advance?”

The opposition leader says this is the biggest theft in the country’s history. Pervவின்n Bulten of the pro-Kurdish HDP finds a system behind it and accuses Erdogan: “It was their own speculators who artificially raised the dollar and then sold it and bought it again at a lower price.”

Speculators from around the Presidential Palace?

These speculators should come from near the Presidential Palace in Ankara, says economist Mustafa Sonmes. That’s where they know about Erdogan’s plans. He was not fundamentally critical of the recovery package. But governments in the constitutional state that want to revalue their currency will openly act, so Sönmez. “They announce something like that and present their plan in a draft form,” he says. “Then there would have been no benefit to anyone. On the contrary: transparency means that citizens would have known in good time and would not have bought any foreign currency.”

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Opposition CHP’s Aykut Erdogdu said on December 20 that many had somehow saved their lira and tried to convert them when the exchange rate for the US dollar or euro was already low. “Masses of people have lost their savings, some did not take their own lives. People trusted Erdogan. He had said before that lowering interest rates was only important for him, not the price of the lira.

The finance minister has denied the allegations

Erdogan’s recovery package – a magic trick? Among other things, he assured savers that evening that losses would be offset if the lira continued to depreciate.

Turkish Finance Minister Nourdin Nabati is defending himself against all allegations of manipulation by the opposition. “If she keeps saying that, she has to prove it. No one intervened that night,” Nepadi said.

However, the ruling coalition thwarted the opposition’s motion to investigate the December 20 incident in parliament. In contrast, the Turkish Bank Oversight Commission reports journalists and experts critical of the government, including economist Sonmas. Supporters of the government also say the opposition handled the lira before December 20. You want to force early elections. After all, despite the corona epidemic, the economy grew and Turkey exported significantly last year.

Sönmez disagrees: “This is only possible due to the excessive depreciation of the Turkish lira. Exporters who received seven lira per dollar suddenly received 15 to 16 lira per dollar,” he says. He added: “None of this is sustainable, because you can only sell your products once at such a low price. After that, you have to re-produce, and to do this you have to import new raw materials at the current exchange rate.”

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Opposition parties have stated they will not run in the by-elections

Currently imports are very expensive. The crisis is putting Erdogan under massive pressure. In a study of his popularity in December, he even made up only 30 per cent of government-affiliated companies. In the 2018 presidential election, he officially won more than 52 percent.

The CHP sees the possibility of ousting the president. Sonmes says a new government will be easier despite massive economic problems. It has little to do with the structure of the economy, but with Erdogan’s political ambition. In order to retain power and be re-elected, Erdogan is designing and directing the economy to his advantage. “The biggest problem facing the Turkish economy is worldwide distrust,” says Sönmez.

Sonmaes hopes an election victory will create new hope for the opposition. So far, however, the Turkish government has not taken any steps to hold early elections. Erdogan has time for his goal until 2023: Turkey should be in the top 10 in the world economy.