Turkish central bank unable to check lira's collapse, debt
The Turkish lira has been in virtual free-fall since July 2014, falling from 2.10 to 2.82 now against the US dollar.
Geopolitics is now another source of risk for the Turkish lira, government debt and Istanbul equities. The Turkish air force is bombing Daesh in Syria and the secessionist Kurdish PKK party in northern Iraq. Suicide bombings have killed Turkish citizens in eastern Anatolian cities on the Syrian border.
Ankara has given the US a green light to launch military airstrikes from the Incerlik air base, once a base for Cold War surveillance flights over the Soviet Union. President Erdogan did not win an absolute parliamentary democracy in the June elections, has not forged a new grand coalition and cannot ally with Kurdish nationalist parties now that the ceasefire with the PKK has ended. A new snap election adds to political risk.
The lira has been in virtual free-fall since July 2014, falling from 2.10 to 2.82 now against the US dollar even before the Federal Reserve has made its first interest rate move. Istanbul shares, dominated by banks and conglomerates, fell 18 per cent in 2015, double the MSCI emerging markets indices.
Economic growth has plummeted to three per cent. Inflation, modern Turkey's financial Achilles heel, is eight per cent and the Ankara central bank is often impotent to tighten monetary policy due to political interference from Erdogan.