Turkish residents took to the streets on Tuesday (November 23) as the Turkish lira fell to a new record low against the dollar.
In Kurtulush district of Istanbul, residents sang “No bread, no freedom”, while in the southeastern city of Diyarbakir, shopkeepers burned what looked like fake dollars in protest, saying, “We can’t sleep, we don’t know about our future.”
The currency has depreciated rapidly over the past couple of weeks and is now worth about 70 percent less than it did five years ago. Most economists attribute the decline in value to President Recep Tayyip Erdogan’s unconventional view of interest rates.
The lira fell to an all-time low of $ 13.1 per dollar on the morning of Nov 24, but has partially paid off since then, at $ 12.15 at the time of writing.
What is behind the fall of the lyre?
A recent spiral ensued speech On November 22, President Erdogan said that a tough interest rate policy would not bring inflation down. He pledged that Turkey would succeed in what he called an “economic war of independence.”
The speech followed three consecutive cuts in interest rates by Turkey’s central bank to boost exports and create jobs under pressure from the president.
Erdogan takes the unorthodox view that high interest rates cause, rather than contain, inflation. Most traditional economists think the opposite: lower rates – and weaker currencies – tend to make things worse because imported goods are more expensive. His views have led to a steady decline in the value of the lira over the past five years. In March, he fired central bank governor Nasi Agbala, who has been steadily raising rates to improve Turkey’s economic plight.
How does this affect people in Turkey?
The fall in the lira has already affected food prices. On November 11, the price of bread in Istanbul increased to 2.5 lira per 230 grams.
According to bread producers, this new price does not even cover production costs as flour prices have risen due to the depreciation of the lira.
Cihan Kolivar, Chairman of the Union of Bread Producers of Turkey, said that in some parts of Istanbul the price of bread will reach 4-5 liras (although this figure is disputed by another industry leader).
Inflation reached almost 20 percent in October, the highest annual rate since January 2019, according to government statistics. This rise came prior to the recent recession in the lira, which means further gains are likely.
In the midst of the crisis, Turks turned to electronic goods as a store of value as Apple’s Turkish website blocked the sale of iPhones and other products on November 24. Potential buyers received a “not currently available” message.
Apple Store Employee said to Reuters“It’s pretty surreal with the economy and everything else, but people see it as a store of value and rush to the stores. They know they can sell it in a year for more than what they paid. “
At an extraordinary press conference Kemal Kilicdaroогlu, leader of the opposition CHP party said today (November 24): “Erdogan puts the economy in a tailspin with every conversation. We have reached a tipping point. The children of the poor will be doomed to starvation. Hunger is at the door of the poor – people cannot feed their children. “