Historically, the value of the Turkish lira against the dollar

Yasser Al-Turki – Special Turk Press

The exchange rates of the US dollar, the euro or the British pound are one of the most followed daily economic indicators for the average Turkish citizen, as many consider short-term fluctuations in currency values ​​an indicator of the functioning of the local economy, especially in the era of accelerating globalization and immediate tracking of currency exchange rates.

Until the 1980s, Turkey implemented a fixed exchange rate system in which the value of the Turkish lira is determined by the Turkish Central Bank, however, due to changes in the global economy and fluctuations in the foreign trade of countries, the exchange rate set by the Central Bank is unsustainable.

The young Turkish Republic, from its founding in 1923 until 1930, left the value of its currency to fluctuations in supply and demand, and in 1931 various and minor adjustments were made to the value of the Turkish lira by the Central Bank.

** Devaluation of September 7, 1946

The 1930s was a period that saw a tendency toward state intervention in the economy and strict foreign exchange controls were implemented, and during World War II, the value of the Turkish lira remained high against other currencies.

However, as a result of the inflation that occurred during the war and the encouraging atmosphere of liberalization in the post-war economy, the value of the Turkish lira was devalued by a decision of the government of Recep Bakr in 1946 by 40 percent, to raise the dollar from 1.3 to 2.8 Turkish liras.

** Devaluation on August 4, 1958

The global economy after World War II was completely different from the 1930s in all respects, as the world was divided into two camps, the axis of the United States and the axis of the Soviet Union. The US foreign aid program and the accompanying free market economy changed the policies of the Turkish economy.

At that time, circumstances and the increase in Turkey’s foreign debt forced it to get acquainted for the first time in its history with the International Monetary Fund, which caused the devaluation of the Turkish lira by 321 percent to 9 liras against the dollar on August 4, 1958.

** Devaluation on August 10, 1970

During the sixties, Turkey went through a period of planning and prioritizing investment policies during the five-year plan, which began with the establishment of the State Planning Commission in 1960, in addition to other institutions, but the incompatibility between plans and short-term macroeconomic management was the most important obstacle in planning policies.

Since 1964, pricing policies and the balance of payments crisis have caused the Turkish lira to depreciate by 66 percent from 9 to 15 lira against the dollar.

** Exchange rate adjustments during the years 1970-1980

The seventies were witnessing a state of economic instability at a high level in Turkey and the developing and developed countries, in terms of the bipolar conflict that caused an increase in defense expenditures and the restriction of resources from the superpowers of the countries in their camps, and the collapse of the Bretton Woods system that defined the economic system again.

In August 1971, US President Richard Nixon announced the de-pegging of the dollar from gold, i.e. the abolition of the direct international transfer of US dollars to gold, and global currencies switched to free-floating.

At the end of 1973, the doubling of oil prices in OPEC led to the sinking of developing economies in debt, including Turkey, the entry of the Cyprus island crisis and the US arms embargo on Turkey, which plunged Turkey into a continuous circular crisis.

Because of its inability to pay its outstanding debts, Turkey was forced to conclude an agreement with the International Monetary Fund in 1978, and within the framework of the program implemented by the Fund, the value of the Turkish lira was reduced to 25 Turkish liras per dollar, and then the following year the lira was reduced to reach the value of the dollar 47 Turkish lire.

The end of the seventies in Turkey was characterized by shortage of basic materials, economic stagnation, high inflation, social and political turmoil, and unenforceable stabilization programs. The second oil crisis triggered by the Iran-Iraq war in 1979 caused a major economic shock, which caused a global debt crisis, which forced Turkey to borrow to prevent its economy from reaching an uncontrollable point.

The economic liberalization movement led by US President Ronald Reagan and British Prime Minister Margaret Thatcher in the eighties of the twentieth century, forced Turkey to open up to the free market on January 24, 1980 to obtain a loan from the International Monetary Fund within the framework of the new economic program it prepared for Turkey, and to move to a model export oriented growth.

Under this new economic model, the exchange rate was required to be volatile to ensure competitiveness, and accordingly the Turkish lira was depreciated, raising the dollar from 47 to 70 Turkish liras.

** Transition to the free exchange rate system

As of May 1, 1981, the Turkish Central Bank began announcing on a daily basis the market value of the Turkish lira against the dollar, transforming Turkey from a fixed exchange system to a floating exchange directed by the Central Bank.

With the establishment of foreign exchange markets within the Turkish Central in August 1988, the exchange rate of the Turkish lira was left to be determined daily according to the fluctuations of supply and demand.

** The Turkish lira depreciated 28 percent in the 2001 crisis

Turkey witnessed the largest devaluation of its currency during the past forty years on February 22, 2001, as negative economic expectations and political tensions played the largest role in the rise of the US dollar from 685,000 to 957,000 Turkish liras, which caused political and economic changes in the country.

** Delete 6 zeros from the currency

After the economic growth that was achieved during the rule of the Justice and Development Party, it became necessary to make adjustments to the Turkish lira, and for this, the Currency Regulation Law of the Republic of Turkey was issued on January 28, 2004, after which 6 zeros were deleted from the currency on January 1, 2004. 2005 to begin the eighth generation of coins.

Since then, a new journey has begun for the pound, which is now equal to $1.34, but that price did not last long, as the exchange rate fell to about 1.43 pounds to the dollar at the end of 2006.

** The depreciation of the Turkish lira after 2018

The negative economic outlook and strained relations between the USA and Turkey due to Pastor Bronson led the US dollar to increase from 3.75 TL at the beginning of 2018 to 7 TL during the year.

The Turkish lira depreciated by 9% on August 13, and 13.6% on August 14 against the US dollar.

The last high drop occurred during the past decade, on March 22, 2021, by 8 percent with the fluctuations caused by the dismissal of the Governor of the Turkish Central Bank, Naji Agbal.