Why Turkey's currency crash does not worry Erdogan

Why Turkey's currency crash does not worry Erdogan

12/3/2021 4:06:00 AM

Why Turkey's currency crash does not worry Erdogan

Turkey's national currency has plummeted 45% against the dollar this year

The lira has flirted with record lows this week, but Turkey's long-time leader is pressing ahead with his "economic war of independence", backed up by low interest rates.So why is Mr Erdogan pushing a model that critics warn risks soaring inflation, higher unemployment and poverty, and what does it mean for Turks?

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Unorthodox policyThe simple reason for the Turkish lira's collapse is his unorthodox economic policy of keeping interest rates low to boost Turkey's economic growth and export potential with a competitive currency.For many economists, if inflation goes up you control it by raising interest rates. But Mr Erdogan sees interest rates as "an evil that make the rich richer and the poor poorer".

"Everything is so expensive," Sevim Yildirim told the BBC at a local fruit market. "It's impossible even to cook a main course for a family with these prices."Consumer inflation is running at almost 20% in Turkey, but the Central Bank of the Republic of Turkey, overhauled by Mr Erdogan, has just lowered interest rates from 16% to 15%, the third cut this year. headtopics.com

Inflation is rising around the world, and central banks are talking about hiking interest rates. But not here, because Mr Erdogan believes ultimately inflation will fall.In the past two years he has sacked three central bank presidents and only this week replaced his finance minister. And so the lira continues to drop.

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BBCI live on my own and my pension isn't enough to afford these pricesBeyaz YeniceSoaring pricesTurkey's economy is heavily dependent upon imports for producing goods from foods to textiles, so the rise of the dollar against the lira has a direct impact on the price of consumer products.

Take the tomato, a vital ingredient in Turkish cuisine. To grow tomatoes, producers need to buy imported fertilisers and gas.Tomato prices were up 75% in August, compared with the year before, according to the chamber of commerce in the south coast agricultural hub of Antalya.

"How can we make money out of this?" asks Sadiye Kaleci, who farms grapes in Pamukova, a small town three hours' drive from Istanbul. "We sell cheap, but buying costs are expensive," she complains, citing high costs of diesel, fertiliser and sulphur, which is thrown on the vines. headtopics.com

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Image caption,Farmer Feride Tufan says she is unable to make any money from selling grapesAnother farmer, Feride Tufan, complains the only way she can get by is by selling her assets: "We can pay off our debt by selling our land and vineyards. But when we sell everything, we'll have nothing left."

The currency has become so volatile that prices are changing daily. Inflation for producers alone is up 50%."I've cut down on all my expenses," says Hakan Ayran, out shopping at a market. "To pay the bills everybody eats less and nobody buys stuff."

Supermarket employees post price hikes on social media, showing before and after labels for products.

Read more: BBC News (UK) »

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