Turkey is facing a new stage in its economic struggle – the Middle East Monitor

Turkey witnessed a historic night on Monday after President Recep Tayyip Erdogan announced that the government would take new measures to prevent the Turkish lira from depreciating against the US dollar. The dollar fell sharply from 18 Turkish lira to the dollar in a few minutes.

In his speech, Erdogan announced economic measures and financial alternatives to allay the fears of citizens caused by high exchange rates. Following these announcements, the appreciation of the Turkish lira has shown that the appreciation of the US dollar against the pound in recent weeks is not due to the collapse of the Turkish economy, nor does it reflect the real value of the Turkish currency. This was the result of manipulation by speculators. The recovery of the lira also showed that government guarantees could help protect the value of the national currency from Central Bank interference.

Turkey aims to break the shackles of energy imports thanks to natural gas found in the Black Sea – Caricature [Sabaaneh/MiddleEastMonitor]

The economic measures and financial alternatives announced by Erdogan, details of which were announced by Turkish Treasury and Finance Minister Nurettin Nabati on Tuesday, allow depositors to realize the same potential gains in foreign exchange savings by keeping their assets in pounds. According to the new system, depositors in Turkish lira banks will protect their profits if their earnings exceed the increase in the dollar, but if the earnings exceed the gains in the exchange rate, the difference must be paid to them through tax breaks. In other words, the government tells citizens, “Leave your money in Turkish lira, do not convert it into dollars, if you make a profit, it is yours, if you lose something from the appreciation of the dollar, it is yours.” , the government will pay for your loss. “

The latest decisions also set a long-term exchange rate through the Central Bank to reassure entrepreneurs about the value of the US dollar so that they do not have a problem setting prices or withdrawing dollars from the market. as much as they can use to pay off their future debts abroad. Entrepreneurs will now have no difficulty in determining costs and profits, and will not be afraid of the possibility of an unexpected appreciation of the dollar when repaying foreign debts.

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Many people who for various reasons avoid depositing their money in banks buy gold to keep the value of the money and often keep the gold at home. It is estimated that such “money under the mattress” is 5,000 tons of gold worth $ 280 billion. The Turkish government is trying to find new ways to encourage citizens to bring their gold into the financial system instead of leaving it empty at home.

Pro-government Turks enjoyed the depreciation of the dollar against the pound on Monday evening. For some, it was the same as they felt after the failed coup attempt in 2016, at least because they saw the crisis that hit the Turkish currency as another attempt to overthrow the government. Its failure is the country’s victory over economic patronage.

Erdogan’s surprise speech showed that he did not take the battle without playing cards, which boosted the morale of government supporters and boosted confidence in the success of the new economic model the government wanted to implement. The appreciation of the Turkish lira is expected to have a positive effect on prices and inflation. Some companies have already announced price reductions a few days ago due to the appreciation of the dollar.

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Turkey’s political opposition was exposed by Erdogan’s move on Monday for bankrupting the dollar’s ongoing rise against the pound to incite the Turkish people against the government and force it to hold early general elections. The sadness that many of the opposition felt that night was visible on their faces; for the sake of their political interests, they clearly hoped for the collapse of the national currency and the country’s economy.

The Turkish government won an important round after the Turkish lira improved, but more can be expected as the economic struggle drags on. However, this victory provides a great opportunity for the success of the new economic model based on production and exports, against the background of figures and indicators that indicate the strength and growth of the Turkish economy. Although the Turkish leadership emphasizes that its decisions will remain within the framework of democracy and free market rules, it is a unique Turkish model worthy of study, although it is similar in some respects to other economic models, such as China.

This article appeared for the first time Al-Arabi Al-Jadid December 22, 2021

The views expressed in this article are those of the author and do not necessarily reflect the editorial policies of the Middle East Monitor.