Turkish Lira Plummets to All-Time Low of 20 Against the Dollar as Erdogan’s Fate Hangs in the Balance

Turkish Lira Hits Record Low Ahead of Decisive Presidential Election Runoff

The Turkish lira faced a catastrophic blow on Friday as it reached an unprecedented low of 20 against the US dollar, intensifying the mounting uncertainty surrounding the upcoming presidential election runoff. This critical vote will determine whether President Tayyip Erdogan will extend his reign into an extraordinary third decade, with the outcome poised to shape the future of Turkey’s economy and political landscape.

Economic Turmoil Grips Turkey as Lira’s Decline Fuels Market Panic

As the lira plummeted to the alarming rate of 20.00 against the dollar at 0508 GMT on Friday, it continued to hover dangerously close to that distressing level. Having weakened by 6.4% since the beginning of the year, Turkey’s sovereign dollar bonds and equities have experienced a severe decline, causing turmoil in the financial markets. Moreover, the cost of insuring exposure to Turkish debt has spiked since the initial round of the presidential election held on May 14, exacerbating concerns over the country’s economic stability.

In the lead-up to Sunday’s runoff, President Erdogan disclosed in an interview on Thursday evening that Gulf states had recently provided financial assistance to Turkey. This temporary relief aided the central bank and the markets, prompting Erdogan to express his intention to meet and extend his gratitude to the leaders of these nations after the decisive vote.

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The first round of the presidential election highlighted Erdogan’s significant lead over his main rival, Kemal Kilicdaroglu. However, the president fell just shy of the necessary 50% support required to avoid a runoff. This outcome fueled heightened forex demand, with market participants anticipating further declines in the lira’s value. In 2021 alone, the Turkish currency has lost a staggering 44% of its value, followed by an additional 30% decrease in 2022.

(Read Also: Central Bank of Turkey Records Negative Net Reserves for the First Time in 21 Years)

Adding to the lira’s downward spiral this year, Turkey was devastated by a series of catastrophic earthquakes in February. With a death toll surpassing 50,000 and widespread destruction across the southern region, the country grappled with the aftermath of this natural disaster. The lira’s devaluation since the May 14 election has further exacerbated its losses, recording a 2.1% decline.

(Read Also: Turkey’s Lira Slumps to Two-Month Low as Erdogan Leads in Presidential Election.)

Alarming figures revealed that the Turkish central bank’s net forex reserves entered negative territory for the first time since 2002. Official data released on Thursday disclosed that the reserves stood at a staggering -$151.3 million as of May 19, signaling a deeply concerning financial predicament.