Turkish President Recep Tayyip Erdogan appointed an internationally respected former banker as finance and treasury minister after winning reelection
Turkish President Recep Tayyip Erdogan won reelection last month despite a battered economy and a cost-of-living crisis that experts say are exacerbated by his unconventional economic policies.
The longtime leader appointed an internationally respected former banker as finance and treasury minister and on Friday named a former co-CEO of a U.S.-based bank as head of the central bank.
But lingering uncertainty over Erdogan’s economic direction and an apparent move to loosen government controls of foreign currency exchanges have led Turkey’s currency to plunge to record lows against the U.S. dollar this week.
The Turkish lira has now weakened by around 20% against the dollar since the start of the year. It has raised fears of even higher prices for people already struggling to afford basics like housing and food amid high inflation.
“I am anxious. I am unhappy. Soon my income won’t pay the rent,” said Sureyya Usta, a 63-year-old who lives in Ankara.
Here’s a look at the falling value of the lira, what lies ahead for the economy and how people have been affected:
ERDOGAN’S ECONOMIC POLICIES
Turkey has been plagued by a currency crisis and skyrocketing inflation since 2021, which economists say are the result of Erdogan’s unorthodox belief that raising interest rates will increase inflation.
Conventional economic thinking — and the approach being taken by central banks around the world — calls for the opposite: rate hikes to control price spikes.
Erdogan has exerted pressure on Turkey’s central bank to lower borrowing costs.
The bank has cut its key policy rate from around 19% in 2021 to 8.5% now, even as inflation hit a staggering 85% last year. Inflation eased to 39.5% last month, according to official figures, but an independent group says the true number is more than double that.
