The decline of the Turkish lira continues despite the nomination of Mehmet Simsek as Turkish finance minister. (Archive image) © Christian Charisius / dpa
With Mehmet Simsek as finance minister, President Erdogan hoped to stabilize the Turkish currency again. But the lira continues to fall.
Ankara/Frankfurt – The Turkish lira's decline continues despite the nomination of Mehmet Simsek as Turkey's finance minister. In doing so, it recorded its biggest one-day loss in two years. The dollar and euro, on the other hand, rise by around seven percent each to record highs of 23.041 and 24.618 lira respectively.
Finance Minister Simsek: Change necessary – but not enough
Simsek, who was finance minister in 2009 and 2018, announced his country's return to "rational foundations" in economic and financial policy over the weekend. Markets are also waiting for the appointment of a new central bank governor. Turkey is in crisis and struggling with high inflation, which at times exceeded 85 percent last year. One reason for this is that the central bank did not raise the key interest rate according to economic doctrine, but lowered it at Erdogan's request.
According to analysts, investors were skeptical about whether Simsek's convocation would stabilize the lira. "A finance minister does not make a monetary policy summer," said Commerzbank expert Ulrich Leuchtmann. "The award of office is a perhaps necessary, but by no means sufficient condition for an actual permanent U-turn in monetary policy." In the very best case, monetary authorities could push through short-term interest rate hikes, but not a permanent turn towards a stability-oriented monetary policy.
The Turkish lira continues to depreciate
The Turkish lira, which has already lost significant value in the face of Erdogan's economic and monetary policies, has crumbled by around 20 percent against the dollar since the beginning of the year. In 2021 and 2022, it also crashed by 44 and 30 percent, respectively. The weak national currency makes imports, on which the resource-poor country depends, noticeably more expensive. (REUTERS, lf)
