Turkish lira slips to new low as Erdogan forms economic team

ANKARA — The Turkish lira plummeted to a new record low on Tuesday morning, continuing its slip after Turkish President Recep Tayyip Erdogan’s election victory extended his reign into a third decade. All eyes are now on the new economy team Erdogan is expected to unveil on Friday along with other members of his cabinet. 

The Turkish currency plummeted to a record low of 20.40 against the greenback on Tuesday by 2 p.m. local time, according to the currency data website Xe. Since the beginning of the year, the Turkish lira has lost another 7% of its value. 

Turkey’s embattled lira sank to historic lows following the Central Bank’s unorthodox interest rate cuts under the influence of Erdogan’s unconventional economic views, bringing the rates as low as 8.5%. 

In contrast, Turkey’s peers within the G20 group have raised interest rates to balance the impact of the Ukrainian war-fueled price hikes.

Erdogan, who has long advocated that higher interest rates cause higher inflation, defended his unconventional economic policy during his victory speech. Addressing hundreds of thousands of supporters gathered at his presidential palace early Monday, Erdogan said with interest rates at 8.5%, inflation would ease as well. 

Government critics argue that under Erdogan’s influence, the Central Bank depleted its forex reserves in a bid to rein in the lira’s dramatic slump, funneling hard currency to the market through backdoor channels in the lead-up to the elections. The Turkish Central Bank's net foreign reserves have fallen below zero for the first time since 2002, according to official data released last week.

Erdogan’s remarks on the heels of his electoral victory were largely interpreted as a signal of his determination to maintain his controversial economic policy. Yet a series of reported meetings between the country’s former Deputy Prime Minister Mehmet Simsek, who resigned in 2018, and officials from Erdogan’s ruling party prompted speculation that Ankara might be preparing to turn to more conventional policies. Simsek, a British-trained economist enjoyed credibility among local and foreign investors during his tenure.

Erdogan, who faced his toughest-ever reelection bid during his two decades in power amid breakneck inflation and an acute cost-of-living crisis, won Sunday's presidential runoff with nearly a four-lead against his rival, opposition leader Kemal Kilicdaroglu.