Ankara Shuns IMF Help Even as Turkish Lira Crashes
ISTANBUL (Dispatches) - Despite the Turkish lira hitting a record low against the dollar and euro, Ankara has so far resisted asking for help from the International Monetary Fund (IMF).
Instead, it hopes to survive a looming balance of payments crunch without any foreign support beyond an extended swap deal with its regional ally Qatar.
In late May, Turkey tripled its existing local currency swap deal with Qatar to $15 billion as a remedy to its depleted foreign reserves.
Any request for help from the IMF would be a last resort, though the factual prerequisites for a deal are already in place.
On Thursday, the lira hit an unwelcome milestone, having lost nearly 20 percent of its value against the dollar since the start of the year.
But as the lira has long been hostage to domestic politics, experts note that the political costs of knocking on the IMF’s door would be higher for Turkish President Recep Tayyip Erdogan amid speculation over snap elections.
Nikolay Markov, senior economist at Pictet Asset Management in London, believes this will be an option of last resort given previous reluctance from Ankara to accept IMF loans.
This year, Turkey’s economy is expected to contract for the first time in more than a decade, with 5 percent of that due to the effects of the coronavirus pandemic.
Instead, it hopes to survive a looming balance of payments crunch without any foreign support beyond an extended swap deal with its regional ally Qatar.
In late May, Turkey tripled its existing local currency swap deal with Qatar to $15 billion as a remedy to its depleted foreign reserves.
Any request for help from the IMF would be a last resort, though the factual prerequisites for a deal are already in place.
On Thursday, the lira hit an unwelcome milestone, having lost nearly 20 percent of its value against the dollar since the start of the year.
But as the lira has long been hostage to domestic politics, experts note that the political costs of knocking on the IMF’s door would be higher for Turkish President Recep Tayyip Erdogan amid speculation over snap elections.
Nikolay Markov, senior economist at Pictet Asset Management in London, believes this will be an option of last resort given previous reluctance from Ankara to accept IMF loans.
This year, Turkey’s economy is expected to contract for the first time in more than a decade, with 5 percent of that due to the effects of the coronavirus pandemic.