ANKARA: Turkey’s currency sank to new record lows yesterday, pummelled by continuing political problems for the government of Prime Minister Recep Tayyip Erdogan.
But the country’s economy minister dismissed any likelihood of the central bank raising interest rates to prop up the lira at its monthly policy meeting today.
The lira fell to 2.2436 to the dollar and 3.0419 to euro in midday trading, although the Istanbul stock exchange was up a narrow 0.25 percent to 65,798.63 points.
The central bank, which is statutorily independent, has been under pressure from Erdogan’s government not to raise interest rates to sustain growth and keep inflation in check.
Instead, it has been using its foreign currency reserves to prop up the currency, selling around $17.6bn last year. “I believe that the central bank should not hike interest rates because it would be an inconclusive step and put a permanent burden on our economy,” new Economy Minister Nihat Zeybekci was quoted as saying.
He said Turkey’s economy was stronger than the economies of many other countries in the world, adding: “We don’t see the weakening Turkish lira as an economic consequence but a psychological and political one.”
He said “as long as Turkey has sound political and economic stability like today, I believe the weakening lira ... will affect foreign investors positively,” in remarks carried by the Anatolia news agency.
Economists have highlighted Turkey’s yawning current account deficit, currently at over 7.0 percent of gross domestic product, as a key concern. The government has sought to play down the impact of the crisis on the once fast-growing emerging economy as only “temporary”. AFP
