Turk­ish cen­tral bank un­able to check lira's col­lapse, debt

The Pak Banker - - COMPANIES/BOSS -

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.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.