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[OPINION] Turkey’s dollar-rich ruling elites profit as lira plummets

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The Turkish lira plummeted to a record low on Tuesday, losing 15 percent of its value and exceeding 13 to the US dollar, but there seems to be little dissatisfaction from Turkey’s ruling elite, who are presumably using this as an opportunity to amass dollars and turn it into a profit.

Turkey’s inflation rate is now near 20 percent, and economist Özgür Demirtaş says that contrary to Turkish government data, the real rate of inflation is at least 50 percent, while millions of people are lining up for hours to save a few cents in buying gas and bread. Turkey’s President Recep Tayyip Erdoğan remains confident in his ability and decision-making as an “economist” and claims the economy is performing well. Erdoğan’s ministers have attempted to divert public attention from Turkey’s economy with claims that the US rate of inflation is higher than Turkey’s and that the Japanese yen has lost more value than the Turkish lira against the dollar. Several critical journalists, economists and members of the political opposition have expressed the view that the ruling Justice and Development Party’s (AKP) elite have reveled in the lira plummeting since they have been buying dollars.

The independence of the central bank from political interference remains crucial to any major economy; however, Erdoğan’s interference in the monetary policy of Turkey’s central bank is clear as he has dismissed three bank governors since 2019. Erdoğan believes low interest rates are conducive to growth in economies. He believes as people get more loans from banks, exports boom and employment increases. He also believes that high interest rates cause high inflation and that lower interest rates are the only way to curb high inflation and has therefore called for a stimulus to boost exports. Following pressure from Erdoğan, the country’s central bank cut its policy rate by 100 basis points to 15 percent on Nov. 18, which, in turn, drove up the value of the US dollar against the Turkish lira, and the Turkish currency sank further to a historic low.

Erdoğan remains unperturbed and asserts that Turkey will succeed in the economic war of independence. The irony is that whenever he makes these kinds of statements on the economy, the Turkish lira only seems to weaken further. Economists and politicians alike have spoken out against Erdoğan’s economic policies and statements, with many believing that the Turkish leader intentionally seeks to weaken the lira in a bid to aid his rich circle of friends and allies who buy dollars when the lira is strong and sell when it’s weak.

Turkey’s opposition İYİ (Good) Party leader Meral Akşener stated last week that she believes Erdoğan is intentionally causing the value of the lira to drop since his speeches are always followed by a drop in the lira by 25 percent.

“Forced interest rate cuts always return in the form of higher interest rates and higher inflation. I seriously wonder who gets what from the perpetuation of this vicious cycle. What does one gain from making the people of this country pay this heavy price”? Hakan Kara, former chief economist of the central bank, tweeted on Nov. 17. Kara also criticized the lack of coordination between the Finance Ministry and the central bank while the lira continues to weaken in this state of political chaos.

İYİ Party official Mehmet Arslan expressed very clearly in a tweet on Nov. 18 that he believes Erdoğan and his inner circle are benefitting from the lira’s losses. “Turkey is rapidly progressing towards becoming a country where some people benefit from the high dollar rate while others suffer from it.

Erdoğan has justified his criticism of high interest rates in the name of Islamist ideology. Through populist rhetoric he plays on the religious sentiments of the Turkish people by referring to the fact that Islam opposes interest. His ministers have not been as successful as him in their political discourse and have on numerous occasions been ridiculed.

Turkey’s former prime minister and Erdoğan’s long-time ally Binali Yıldırım told party members in the eastern city of Erzincan on Sunday that inflation in the United States has increased from 0 percent to 7 percent — a seven-fold increase — while Turkey’s inflation simply doubled from 10 percent to 20 percent.

Another ludicrous statement on the Turkish lira’s loss in value came from AKP deputy group chairman Cahit Özkan. He said in parliament last week that “the Japanese yen is trading at 114 to the US dollar but that the Japanese do not evaluate their economy based on the weak yen rate.”

Famous Turkish comedian Şahan Gökbakar responded to Özkan’s comment on Twitter last week, saying that “the Japanese yen has been trading as 1$=113-114 yen since 1992. So the rate has remained the same for the last 30 years. Japan’s economy is the third largest in the world. The minimum wage in Japan is $1,500 a month, while it is $260 for us. … Japan was the wrong example. Venezuela would be a better example for Turkey.”

Veteran journalist from the Sözcü daily Deniz Zeyrek expressed frustration at Fox TV on Sunday morning over the fact that AKP ministers intentionally keep making these ridiculous statements in public, while in private they all benefit from the weak Turkish lira as many young AKP members have wealth worth millions of dollars, having become ultra-rich during this economic disaster while ordinary Turkish citizens struggle to make ends meet.

Still remaining is a burning question concerning the whereabouts of the central bank’s $128 billion. Turkish opposition parties blame Erdoğan’s son-in-law, Berat Albayrak, who resigned from the position of finance minister in November of last year, for the missing money, and several economists said Erdoğan wasted the huge sum on a failed defense of the lira. While Turkey’s lira becomes increasingly worthless and the cost of living continues to soar, Albayrak, who was widely credited with pushing the policy of using central bank reserves to support the lira while keeping interest rates low, has been seen enjoying a family holiday in Paris.

Erdoğan will surely not stop making statements that cause the lira to plummet further while his inner circle benefits from the high dollar rates. Turkey’s main agenda is now the economy, as opposition parties call for snap elections and millions of Turks grow increasingly dissatisfied with the ruling AKP’s economic policies. Meanwhile, the AKP’s elites are growing acutely aware that they might not get the opportunity to enjoy their foreign currencies in the country and are rushing to invest abroad.

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