The share of foreign exchange in savings in Turkey has risen to 49.4 percent, the country’s central bank has announced. Turkish savers are thus responding to the erratic rate of the Turkish lira over the past week. On Friday, the currency hit a new low against both the dollar and the euro.
On Thursday, the lira took a dive and hit a new low a day later. The Turkish currency has lost 20 percent and 30 percent of its value against the dollar and the euro respectively this year.
There was a call on social media for the resignation of Finance Minister Berat Albayrak, the son-in-law of President Erdogan, after which the president and some of his ministers expressed their support for the Albayrak.
Erdogan said on Friday that Turkey is in better shape than yesterday and that due to the corona crisis, economic fluctuations are occurring around the world. “Turkey is on an economic boom, but some people refuse to see it,” said the president. “The lira’s fall is temporary,” he added.
There are serious concerns about the central bank’s reserves, which have sold tens of billions of dollars in recent months to keep the lira exchange rate stable. Those reserves have been exhausted.
In addition, Turkey is struggling with stubborn inflation of almost 12 percent, making an interest rate hike obvious. Erdogan, however, is a strong opponent of high interest rates, with the result that the central bank has actually cut interest rates further and further in the past year, to below the inflation rate.
The opening of the credit tap has also created a budget deficit. Normally this can be partly financed with hard currency income from tourism, but that income will largely be canceled this year.