Turkey’s lira sputtered to another record low on Monday despite $6 billion in central bank interventions this month, after President Tayyip Erdogan doubled down on his unorthodox low-rates policy by referring to Islamic usury doctrine.
The president’s push for 500 basis points of interest rate cuts since September has set off Turkey’s worst currency crisis in two decades, with the lira crashing 35% in the last 30 days.
The currency fell to as far as 17.6 to the dollar, an all-time low, and was at 17.44 at 0747 GMT.
Erdogan defended his economic policy on Sunday and likened the currency volatility to attacks on the country’s economy that have roots in 2013 nationwide protests, which began in Istanbul’s Gezi Park over access to green space.
“We’re lowering interest rates. Don’t expect anything else from me. As a Muslim, whatever (Islamic teaching) requires I will continue to do that,” he said, referring to Islamic finance in which high interest, or usury, is typically avoided.
Under pressure from the president, the central bank cut rates again last week by 100 points, sending real rates deeper into negative territory, a red flag for investors and savers.
Despite widespread criticism and rapid fallout for the economy – including Turks’ fast eroding incomes and savings – Erdogan has forged ahead with his so-called new economic programme that prioritizes exports and lending.
Inflation jumped to 21% last month and is expected to pass 30% next year. Economists and opposition lawmakers say the rapid monetary easing is reckless and it has sent import prices soaring.
The lira has lost more than half of its value this year and is by far the worst performer among peers for three years running, due largely to damaged monetary credibility, analysts say.
In an attempt to slow the selling and address what it called “unhealthy” prices, the central bank has intervened five times this month. Bankers’ calculations show it has sold more than $6 billion from its already depleted foreign reserves.