The Turkish lira witnessed a sharp decline in the last hours, prompting local banks to intervene and sell about $ 8 billion to defend them, according to the “Bloomberg” agency from well -informed sources.
This decline comes in the wake of the arrest of the Istanbul Mayor, Akram Imamoglu, the main rival of President Recep Tayyip Erdogan, which sparked anxiety in Turkish financial markets.
Wide banking interventions to stop the bleeding
According to “Bloomberg”, Turkish banks sold about 8 billion dollars until mid -day Wednesday in an attempt to support the lira, which witnessed a 11% decrease at times before their losses reduced to 5.5% at the level of 38,8565 against the US dollar by 12:45 pm in Istanbul. The level of closing the Turkish currency yesterday, Tuesday, recorded 36.67 pounds for the dollar.
Stopping the policy of critical facilitation
In light of this sharp decline, economic experts expected that the Turkish Central Bank had to suspend the monetary facilitation course at its meeting next April.
According to the analysis published by the Investment platform, the lira decreased by 11% in some stages of the day places the makers of monetary policies in trouble, as it is expected to lead to the acceleration of inflation during this month.
“In the very near -term, this development is a major dilemma for the central bank, as it will likely to stop the interest -reducing course instead of reducing it by 250 basis points as expected previously,” said analysts at Capital Economics.
Fears are increasing
In addition to the direct economic impacts, the arrest of Imamoglu’s arrest raised questions about the future of economic reforms in the country. Experts believe that this step indicates an increase in political risks and the presentation of political considerations on economic decisions, which may weaken Turkish institutions and undermine efforts to restore economic stability.
Investors were counting on a period of political calm after the last elections (took place in May 2023), which would have given the government the opportunity to implement necessary financial and economic reforms. However, the recent developments dispelled these hopes and threw a shadow of doubt about Ankara’s ability to implement any serious reform policies in the near future, according to Infosting.
Financial market reactions
These political turmoil negatively affected the performance of the Turkish financial markets, as the stocks witnessed a sharp decline, and the returns of government bonds increased, reflecting investor concerns about the future of the Turkish economy.
For its part, the Istanbul Stock Exchange announced the interruption of trading temporarily after the main index decreased 6.87% in early transactions, and the trading separator mechanism was activated at the market level.
The sovereign bonds decreased for ten years, which led to a rise in their returns by 175 basis points to 29.94%.
In light of these circumstances, it seems that Turkish economic policies are facing complex challenges that require a quick response by decision -makers, whether in the central bank or the government, to maintain the stability of markets and contain the repercussions of the political crisis on the national economy.
Ihsanoglu’s arrest comes after years of legal battles against him, and Ihsanoglu faces multiple lawsuits, which may lead to a prison sentence for more than 7 years and prevent him from taking over public positions.
For his part, the Minister of the Treasury and Finance, Mohamed Shimashk, stressed that the government’s economic policy is still unchanged, and he said in a tweet on X: “The economic program that we apply is determined.”
