Munich Personal RePEc Archive

The Currency Crisis in Turkey and its Implications

Oyadeyi, Olajide (2021): The Currency Crisis in Turkey and its Implications.

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The Turkish Lira is in the midst of a currency crisis, there's no other way to phrase it. USD/TRY rates have surged almost 42 percent and EUR/TRY rates have risen over 37 percent since the Central Bank of the Republic of Turkey (CBRT) made a surprise 100-bps rate decrease at the end of September. Under Governor Sahap Kavcioglu's tenure, the CBRT has lost all appearance of independence, owing to heavy-handed pressure from Turkish President Recep Tayyip Erdogan. The currency crisis that has bedeviled the Turkish Lira in recent months has already taken a negative turn, and another negative shift could be on the way, with the CBRT expected to maintain its rate cuts in the near future. Turkey's short-term external debt stock has risen to $124.4 billion, a growth of +8.8% since the end of 2020, according to news released today. The rise in the USD/TRY and EUR/TRY exchange rates will only exacerbate Turkey's financial woes in the coming months. According to CBRT data, approximately 43 percent of the country's debt is denominated in US dollars, with just over 25 percent pegged in Euros. This article explains the implications of such a move by the Turkish authorities on a developing economy like Nigeria.

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