To stop the fall of the Turkish Lira ahead of elections
Mahfi Eğilmez is a prominent economy analyst who worked as the Undersecretary of the Turkish Treasury in the past and is now working as a consultant. In the morning economy show on private broadcaster NTV on May 21, he underlined that the value of 1 United States dollar has risen to 4.55 Turkish Liras. It was 4.42 when the Borsa Istanbul exchange closed on May 18.
The 4.55 rate was in the morning at 9:15 a.m. At around 3:15 p.m., when we were laying out the Hürriyet Daily News front page in the newsroom, the rate had increased to 4.60.
In the morning, Eğilmez said he had calculated the loss of the lira against the dollar since the beginning of this year, which has been 19.1 percent in less than five months. As it continues to rise now, it has to be more than that. Eğilmez also said something has to be done before it is too late. At this point, it is not only the job of the Central Bank.
Güven Sak is another prominent economist. Having served in the Central Bank’s Monetary Policy Committee (PPK) in the past, Sak is currently the head of the respected Turkish Economic Policy Research Foundation (TEPAV) of the TOBB University of Economics and Technology in Ankara and writes columns for papers, including Hürriyet Daily News.
In his column published in the economic daily Dünya on May 21, Sak said the loss of the lira against the dollar has dipped to 70 percent in the last decade. What is more worrying is that he points out 90 percent of this loss has been since 2014 and 5 percent of it has been in the last few days.
In 2008, an American citizen could buy 1 lira for 75 cents. Now, it’s 22 cents.
Sak correctly points out that 2007 was the year Turkey stopped its structural reform program. In the same year, Nicolas Sarkozy in France and Angela Merkel in Germany said they were against Turkey’s membership to the EU, despite political and economic reforms for harmonization in the 2002-2005 period.
In addition to those deterrent factors, 2007 was a year of political turmoil in Turkey over the election of Erdoğan’s ruling Justice and Development Party (AK Parti) government’s Foreign Minister Abdullah Gül as president. The row was mainly with the military and the judiciary establishment. It was followed by a closure case against the AK Parti, which was turned down in the Constitutional Court with a narrow margin.
It should not be seen as a coincidence that the lira has continued to fall against the dollar since 2008.
That means the purchasing power of Turkish people keeps declining with acceleration. There are serious outcomes of this fact ahead of the June 24 snap elections. Turkey is an energy importing country and the value of every cent means Turkish people have to pay more for the gas they put in their cars, lorries or fuel in their homes for daily needs.
In order not to be in the position of increasing fuel prices before elections and also not to be in the position of slightly increasing interest rates for relief, since Erdoğan sees the rates as the “mother of all evil,” the government has issued a decree to regulate the special consumption tax (ÖTV) downwards when necessary in order to keep gas prices fixed against the Treasury income.
According to official figures, 30 million of the population of 80 million Turks (including children of course) are in debt to banks or other financial institutions, excluding private debts.
It is not clear what kind of a role the economic outlook plays at the ballot box, during both the presidential and parlamentary elections, since Erdoğan and the AK Parti government have successfully drawn the people’s attention to Turkey’s foreign policy problems, Turkey’s fight against terrorism, and reminding them of the bad old days in times of coalition governments.
Those days were bad, mainly because of the bad economic situation. However, this time, Turkish voters are going to make their choices in a brand new election system for a government system, which will be tried for the first time under state of emergency conditions. It is not easy to predict the share of economic factors on election results.