The Turkish lira has recorded the strongest week in its history – following President Erdogan’s anti-dollarization program; “Citizens converted about $ 900 million per pound”
The Turkish lira closed its strongest week in history, having jumped 44% following the economic plan presented by President Recep Tayyip Erdogan.
On Monday, the currency plunged to an all-time low of 18.4 pounds to the dollar, after a month-long decline due to lower interest rates, an impetus for Erdogan, and fears of an inflationary spin. Later that day, however, the president unveiled a plan designed to encourage citizens to save instead of shooting dollars, while promising that the administration would make up for the savers with the exchange rate gaps.
Erdogan’s anti-dollarization program has led to four consecutive days of an increase in the value of the pound, in which Turkish citizens have converted about $ 900 million per pound, according to Turkish Finance Minister Nureddin Nebat. Today, the pound actually lost 4% to a level of 11.85 to the dollar.
The pound has received a bigger boost from what traders and economists call “back door dollar sales” by state-run state-owned banks, backed by the central bank.
Reuters reported yesterday that government banks in central Turkey had sold large amounts of dollars earlier this week following Erdogan’s announcement.
“The state-owned banks have provided significant support to the foreign exchange market, but not only have they sold dollars,” said a banker who preferred to remain anonymous.
Earlier this month, the central bank announced that it had sold dollars – and this week did not issue a similar announcement. In the first three days of the week alone, the central bank’s foreign exchange reserves fell by $ 8.5 billion, according to calculations by bankers who spoke with Reuters. Since the beginning of December, balances have shrunk by $ 18 billion.
Erdogan said today that Turkey’s economy is undergoing “historic change,” and that it will eventually be included among the world’s ten largest economies. “This change began a long time ago. We abandoned the classic approach that inflation should be controlled through the interest rate,” he said. According to him, instead, the government prefers an economic policy that gives priority to growth based on investment, production, exports and surplus in the trade balance.