The Turkish lira fell to its lowest level in history against the dollar on Tuesday amid uncertainty over the outcome of presidential and legislative polls in mid-May that could lead to the first political changeover in two decades.
The currency fell to 19.5996 lira to the dollar, an unprecedented drop since the introduction of the new lira in January 2005.
Since the accelerated depreciation of the Turkish currency at the end of 2021, the government has put in place measures to prop up the lira, which has been plagued by inflation and capital outflows.
However, this has failed, according to Mike Harris of the Cribstone Strategic Macro consultancy.
Even though inflation decelerated steadily over the past five months, it still stood at 50.51% year-on-year in March.
At the same time, while most major economies have tightened monetary policy sharply to curb soaring prices, Turkey has eased it drastically.
The Turkish central bank’s main policy rate has thus been lowered from 14% to 8.5% since last August, under the impetus of President Recep Tayyip Erdogan, who argues that high interest rates promote inflation, contradicting all prevailing economic theories.
Erdogan’s main opponent in the 14 May presidential poll, Kemal Kiliçdaroglu, promises, if he wins, to return to a form of economic orthodoxy and restore the independence of the central bank.
The incumbent’s economic record has helped weaken his bid for re-election, to the extent that the latest polls now give a slight advantage to his main opponent.
