Turkey burning through dollars ‘like a house on fire’, top economist says
Turkey is spending its foreign currency reserves at an alarming pace to support the lira, according to globally renowned economist Professor Steven Hanke.
The economic policies of President Recep Tayyip Erdoğan and his son-in-law, Treasury and Finance Minister Berat Albayrak, have driven the lira into the ground and Turkey should take emergency measure to reverse the trend, Hanke said.
“Turkey is burning through its foreign exchange reserves like a house on fire,” Hanke said in comments on Twitter on Sunday.
The central bank has spent almost $10 billion since July, leaving its reserves at $41.12 billion, he said.
The Turkish central bank has slashed interest rates to below inflation to support government stimulus measures that then led to a borrowing boom. Despite hiking its benchmark rate to 10.25 percent from 8.25 percent in September, deposit holders and investors have continued selling the lira, pushing the currency to successive record lows against the dollar.
The lira rose 0.2 percent to 7.9145 per dollar on Monday, off an all-time low of 7.9612 per dollar reached last Wednesday. Losses for the year total almost 25 percent.
Hanke, known as the father of currency boards and for his unorthodox methods of measuring inflation, said Turkey should establish a gold-backed currency board immediately to steady the lira and rein in inflation.
Annual price increases in the country are running at an annual 38.97 percent, Hanke said. Official consumer price inflation in Turkey stands at 11.8 percent.
Turkey's central bank is due to meet on Thursday to decide on interest rates.