The Turkish lira is receiving a new blow and recording the lowest level since mid-May
Sunday – 14 Dhu al-Qi’dah 1441 AH – 05 July 2020 AD No. number [
Turkey still faces external financing risks amid a jump in inflation more than expected (Reuters)
Ankara: Saeed Abdul Razek
The Turkish lira received a new blow, and fell to its lowest levels against the dollar since mid-May (May), and to 6.88 pounds for the dollar in late trading last night before last, and continued at the level of 6.86 pounds to the dollar in trading yesterday (Saturday), against the backdrop of an agency warning « Fitch »International credit rating of external financing risks still facing Turkey.
And, «Fitch», in a report yesterday evening, that Turkey is still facing external financing risks, and that its monetary easing cycle is nearing the end, after inflation jumped more than expected.
The Turkish lira achieved a record low on the seventh of May (May) last, when it touched the limits of 7.25 pounds to the dollar, which returned the atmosphere of the deterioration that suffered in August (August) 2018. And last week, the Turkish Central Bank suspended, unexpectedly, a facilitation course Its duration is almost a year, in the face of a 13 per cent drop in the lira this year, which depleted foreign exchange reserves, in light of the country’s high external obligations.
Fitch said that there are “significant downside possibilities” to her expectations that Turkey’s balance of payments will stabilize in the second half of the year, noting that external pressures are still Turkey’s main credit point.
Turkey’s total external debt jumped to 431 billion dollars at the end of last March, and the country’s net external debt reached 256.5 billion dollars, or 33.8 percent of the gross domestic product, according to data announced by the Ministry of Treasury and Finance last Wednesday.
Turkey needs $ 164.6 billion in financing to pay off short-term debt maturing in 12 months. The current account deficit for Turkey during the first quarter of the year was 12.9 billion dollars, and is expected to reach 30 billion dollars by the end of the year, which means – according to experts’ estimates – that Turkey’s need for external financing will reach 195 billion dollars.
The total foreign debt of Turkey amounted to 1.4 trillion Turkish liras (225.8 billion dollars) until the end of February, and the Turkish government resorted to borrowing from within by offering government bonds to support the weakening Turkish lira against foreign currencies.
The Fitch report came on the same day that Moody’s, the international credit rating agency, announced that the Turkish economy will experience a severe contraction during the current year due to the Coruna virus epidemic, after it had previously announced, at the beginning of last month, that it would shrink by 5 percent, in contradiction with The statements of Turkish officials, led by Minister of Treasury and Finance Pratt Al-Bayraq, who announced that “the economy will achieve significant growth by the end of the year, exceeding 5 percent.”
Moody’s reported that inflation in Turkey continues to rise, although financial markets have achieved temporary stability during 2019, new concerns have emerged regarding transparency and policies that have spoiled this stability, led to a decline in foreign exchange reserves, and an increase in citizens ’purchase of foreign currencies, which threatens to decline New large for the Turkish lira.
The IAEA has warned that Turkey may experience a huge currency exchange rate crisis similar to the one it witnessed in 2018, and the matter may lead to very difficult financial conditions.
The Turkish lira recorded during the year 2018 its lowest level against the dollar since 2001, when it lost 40 per cent of its value, and the dollar exchange rate reached about 7.24 pounds, due to investor concerns about the policies of President Recep Tayyip Erdogan and his pressure on the central bank not to raise prices The benefit is for continuing to fuel economic growth, the belief that the bank is not independent, as well as strained relations between Ankara and Washington.
The currency and investment crises have caused a decline in confidence in the Turkish economy, which today faces one of its most complex economic, financial and monetary crises, caused by the decline of the lira, in addition to a sharp decline in foreign trade, which exacerbated the crisis of abundance of foreign exchange.
And the index of confidence in the Turkish economy fell during last June, as a result of the negative consequences of the outbreak of the Corona epidemic in the country, and the government’s inability to manage and control the areas of the epidemic, by 15.5 percent year on year to 73.5 points, down from 87.2 points during the same period of last year.
The inflation rate rose to 12.62% in the month of June, compared to 11.39% in the previous month of May.