Apr 12 2019

Turkish lira nears lowest since crisis as elections, economy weigh

Turkey’s lira fell towards its lowest levels since a currency crisis as President Recep Tayyip Erdoğan convened a key meeting of his ruling party and his son-in-law failed to convince investors of an economic rescue plan in Washington D.C.

The lira dropped as much as 1.5 percent to 5.8235 per dollar in Istanbul, adding to losses of 1 percent on Thursday. It neared a key level of 5.845 per dollar reached on March 23, the weakest level since the country emerged from the currency crisis five months earlier.

Erdoğan was chairing the executive meeting of his governing Justice and Development Party (AKP) on Friday after losing public support in Turkey’s biggest cities of Istanbul and Ankara at March 31 local elections. His AKP has called on the Supreme Election Council (YSK) to cancel the Istanbul vote claiming opposition officials engaged in fraud.

Investors in Turkey, along with local holders of lira, have been selling the currency on concerns over political instability and economic policy. A renewed spat with the United States over Erdoğan’s planned purchase of S-400 missiles from Russia, seen as a sign that Turkey is abandoning its traditional Western alignment, has also prompted people to buy dollars for lira.

The YSK has decided to delay a decision on the AKP’s request to annul the election in Istanbul until a partial recount of votes is complete, the state-run Anadolu news agency reported on Friday. Republican People’s Party (CHP) candidate Ekrem İmamoğlu leads by almost 14,000 votes, about half of his initial margin of victory, as the recount continues, local media reported.

Meanwhile, Treasury and Finance Minister Berat Albayrak is in Washington to attend meetings of the World Bank and International Monetary Fund. He is also expected to hold talks with senior U.S. officials and businessmen.

During a meeting with investors organised by U.S. bank JPMorgan late on Thursday, Albayrak failed to convince investors of the government's plans to overhaul the economy, Reuters reported, citing attendees. 

“I don’t think he persuaded anybody, it did not go well,” said one investor, who asked to remain anonymous.

Speculation is mounting that Erdoğan may be forced to drop his opposition to an IMF loan accord that would help lift Turkey out of an economic recession. The capital would also provide much-needed funds for the banking industry, which is dealing with a surge in bad loans and requests by companies to restructure foreign currency-denominated debt. Albayrak's economic plan includes handing $4.9 billion to state-run banks.

Albayrak is also in Washington as political pressure mounts for economic sanctions against Turkey for its purchase of the S-400 air defence missiles and its jailing of U.S. consular staff. Erdoğan said earlier this week that he may bring forward the delivery date for the Russian weapons from July, saying Turkey, a NATO member, would not step back from the purchase.   

U.S. sanctions last August helped tip the country into the currency crisis, which was also sparked by fears that the economy was overheating.

Albayrak will be attending a Turkish-U.S. conference on bilateral relations in Washington on April 14-16. U.S. National Security Adviser John Bolton and Trump adviser Jared Kushner would be attending, the pro-government Sabah newspaper reported. But their names did not appear on the list of conference participants, with Bolton's disappearing some two weeks ago.