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Turkish Lira Hits New Low as Erdogan Persists with Takeover of Central Bank

by TheTower.org Staff |

The Turkish lira has continued to lose value over the past week as President Recep Tayyip Erdogan reiterated his demand for more control over the Turkish central bank, hitting a new low of 2.448 to the dollar. It was also trading lower at 2.79 to the Euro.

Erdogan is demanding the bank continue to lower interest rates, which will lower inflation rates and attract foreign investments. But the central bank most economic experts claim that such an action could seriously damage the Turkish economy, which is already under crisis due to a wave of capital flight. Under current central bank policies, the rate of inflation actually fell in January to 7.27 percent.

In January, the Turkish Central Bank cut interest rates to 7.75 percent, about a week after Erdogan warned that he would summon central bank officials if they did not meet his repeated calls to lower the rate. Turkish economic experts warn that this policy of the ruling party could lead the Turkish economy to a precipice.

Some commentators (Arabic link) say that the reduction in Turkey’s national interest rate could lead to a rise in inflation rates and further decrease the value of the Turkish lira. According to them, Erdogan started last year to try and take over the central bank after he dismissed several senior employees as part of his attempt to Islamize the banking sector and subject it to his ideological views.

The unrest of the Arab Spring led Turkey to lose many trading partners in the Middle East. Turkish opposition groups lay the responsibility for the country’s economic crisis and the flight of foreign investors on President Erdogan. They see this as a result of Erdogan’s policies and attempts to take over the machinery of the state.

In the past two years, first as prime minister and now as president, Erdogan has exerted stricter control over the Turkey’s police, military, government bureaucracy and judiciary. He has also cracked on the independent press, including, at the end of last year, the arrest of the editor of a top paper in Turkey.

[Photo: World Economic Forum / Flickr]

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