Turkey’s central bank took action on Monday to free up cash for banks as the country grapples with a currency crisis sparked by concerns over President Recep Tayyip Erdogan’s economic policies and a trade and diplomatic dispute with the United States.
The Turkish lira has nosedived over the past week and tumbled another 7 per cent on Monday as the central bank’s measures failed to restore investor confidence.
The uncertainty pushed down world stock markets and briefly caused a sharp drop in the currencies of other emerging economies, like South Africa and India, amid concerns that the financial trouble could spread.
The lira hit a record low of 7.23 per dollar late on Sunday after Erdogan remained defiant in his economic policies and the standoff against the United States, a NATO ally.
“Turkey is faced with an economic siege,” Erdogan said Monday, in the latest of a series of speeches. “We are taking the necessary steps against these attacks and will continue to do so.”
He has threatened to seek new alliances — a veiled hint at closer ties with Russia — and warned of drastic measures if businesses withdraw foreign currency from banks.
Erdogan also ruled out the possibility of higher interest rates, as they can slow economic growth. But independent analysts say higher rates are needed urgently to stabilise the currency and Erdogan’s hard line is one of the reasons investors are worrying.