After the lucky recovery of Turkey’s lira from, what can be called the rock-bottom, it still cannot be said to be in a safe position. Turkey does not seem to have a proper plan in maintaining its economic situation and therefore, the risks of the lira going down again, remain sky-high. The lira was dealing at 5.7900 in comparison to the dollar on Thursday till 10:30, thereby, improving its low status of 7.24 since a considerable amount of time.
In spite of Turkey’s monetary recovery for the moment, experts are not relieved. Jim McCaughan, the chief executive at Principal Global Investors told CNBC that despite Turkey’s sudden and sharp recovery, it cannot be said to be in a safe zone and the crisis that has been created, can escalate.
McCaughan said that the central bank might be trying to secure Turkey’s economy, which woul, in turn, make the economy of Turkey move slow but would make the currency stable. This step might be helpful in decreasing the fiscal deficit or the trade loss. According to McCaughan, therefore, these are more necessary steps that might lead lira to recover on a long-term basis.
The investors in the economy have been signaling towards generating strategies that might bring back the status of lira and therefore, stabilize Turkey’s economy. President Recep Erdogan has faced backlash for not given enough freedom to the central bank to take the necessary measures that can make the situation better and remove the crisis. The central bank immediately needs to increase interest rates with an economy that has crossed the inflation percentage of 15% which crosses the central bank’s limit of 5% by a huge amount.
If the crisis persists, the lira will fall more and Turkey will face problems to repay its debts. Turkey is a country that has taken immense help from foreign funds, which is equal to about half of the gross domestic product of Turkey.