Turkish lira’s freefall continues after Fitch statement
Cypriots consider abandoning plunging currency
Turkey’s struggling currency hit a new historic low of 4.66 to the US dollar after a statement from credit rating agency Fitch on Tuesday.
“Comments from the Turkish president raise the possibility that discretionary policymaking and policy predictability will come under pressure after June’s elections,” Fitch stated, as reported by Hurriyet Daily.
The agency’s warning was in reference to a speech made by Turkish President Recep Tayyip Erdogan in London last week. During his address, Erdogan reiterated a view, widely challenged by economists, that interest rates should be lowered despite rising inflation. He also repeated a suggestion that he would be more proactive in influencing central bank policy.
“Greater erosion of monetary-policy independence would put further pressure on Turkey’s sovereign credit profile, particularly if it contributed to serious external financing stresses and a deterioration in the macroeconomic environment, or undermined wider economic policymaking credibility and the country’s business environment,” Fitch’s statement added.
Ahval reported on Tuesday that the Turkish Republic of Northern Cyprus, which uses the lira as its official currency, was considering dropping it in favor of another unit.
“There are various proposals. Radical proposals such as moving to another currency or fixing exchange rates are on the table,” TRNC Prime Minister Tufan Erhüman said.
Erhüman added that the globally unrecognized statelet suffers from structural economic problems, not all of which it could resolve on its own, according to Ahval, a news website that focuses on Turkey.
“In the light of developments in the TRNC and the world, the prices of petrol and foreign exchange have risen, the Turkish lira has lost its value and although we might flatter ourselves as being able to affect that, it is impossible. We are continually organizing meetings with our ministers about the economy. Certain changes that might be considered very radical may come on to the agenda,” Erhüman said.