Turkish Lira Rises After a $15bn Loan From Qatar
In February, it seems as the Turkish Economy will only get stronger. The Lira was the strongest it was against the US Dollar. On August 13th, the Lira dropped by 11% to an all time low against the USD, losing almost half of it’s value. Inflation rates are crazy as the people of Turkey pay a lot more for the same products.
There are several reasons why that has happened. President Erdogan has stated that since Trump raised tariffs on certain metals it has effected the Turkish economy. On the contrary, certain economists blame Erdogan for not raising the interest in order to block the inflation. This isn’t exactly season 2 of house of cards, but it has similarities. Erdogan doesn’t want to increase the interest rate since it will make a lot of projects more expensive. While it’s crucial for the economy to raise the interest at these times, it looks like Erdogan cares more about his legacy than to improve the economy. Blaming the United States for the crisis might help in the public opinion, but the economy will suffer without drastic changes.
What’s the impact of the loan?
However, Erdogan has found a solution to stabilize the Lira and to block the inflation. Yesterday, he agreed on a $15bn load from Qatar that will be channeled into the banking system to avoid the banks from collapsing. So far, the Lira increased by 6% and it seems as the fall is about to end. But, no serious change has happened, the loan is similar to placing a band aid on a wound, it might stop the bleeding but it won’t handle the infection. We might see the crisis returning if Erdogan won’t change his monetary policy.
A loan from Qatar could become a hazardous step for Turkey. As parts of the Muslim world boycotts Qatar, they are aching for some support from within the Muslim camp. Erdogan, the leader of one of the biggest Muslim countries could become a valuable asset in legitimizing the statues of Qatar. As the 2022 world cup is in jeopardy, Qatar needs some global support. This loan is exactly what Qatar has needed, since it’s still a mystery how will Turkey will pay off this loan.