Istanbul: The Turkish lira on Wednesday extended its historic slide on the eve of a meeting at which the central bank was expected to lower interest rates for the fourth month in a row.
The lira has shed half its value since the start of the year -- and 30 percent in the last month alone -- as policymakers bow to President Recep Tayyip Erdogan´s wishes to bring down borrowing costs despite soaring inflation.
A dollar could buy three liras in 2016 and 7.43 liras on January 1. It was worth 14.70 liras on Wednesday while the annual rate of consumer price increases stood at more than 20 percent.
Erdogan has launched a self-declared "economic war of independence" that defies conventional market economics by fighting inflation through a reduction of borrowing costs.
Central banks around the world are instead either raising or preparing to raise rates to combat consumer price jumps caused by factors related to the coronavirus pandemic.Erdogan has cited China as an example as he pushes for economic growth at all costs.
China brought down the value of its currency to boost exports and achieve spectacular rates of economic expansion over most of the past two decades. Turkey´s economy also expanded at an annual rate of 7.4 percent between July and September.
But most analysts believe Erdogan´s attempts to boost jobs and propel economic expansion through cheap exports are likely to end in social turmoil.
Turkey imports most of its raw materials and spends foreign currency to buy foreign oil and natural gas.
The lira´s steady depreciation makes these purchases more expensive.
Economists estimate that Turkey´s net hard currency reserves are running dangerously low -- and are in negative territory when so-called "currency swap" agreements with allied countries´ banks are taken out.
The central bank has depleted its reserves further by intervening four times in the past month to help cushion the lira against more dramatic single-day falls.