Turkey will pay a high price for its government’s use of financial policy for political gain as it will have no option but to seek funds from the International Monetary Fund to see it through the coronavirus pandemic, columnist Murat Muratoğlu wrote for Sözcü newspaper.
Treasury and Finance Minister Berat Albayrak has promised support for the sectors most affected by the outbreak, which has jumped to 47 known cases in Turkey since the first infection was confirmed last week.
But Turkey’s economy is in no state to bear the impact of the virus on its own, Muratoğlu said.
“Our country needs foreign currency. Tourism is wiped out. Exports are stuttering,” he said.
Yet the recent actions of Turkey’s government, which has stretched the economy to the limit to pursue growth and buoy the lira for political gains, will drive foreign investors away, he said.
A currency crisis in 2018 knocked nearly 30 percent off the lira’s value by the year’s end and sent the country into a technical recession.
Turkish President Recep Tayyip Erdoğan’s government responded by ordering public banks to cash in their foreign currency reserves at key times when the currency showed weakness, including weeks before local elections in March 2019.
The government has also spent billions of dollars in efforts to stimulate the economy, also slashing interest rates to below the rate of inflation. Meanwhile banks have racked up large tallies of bad debt, Muratoğlu said.
Now Turkey needs to take measures similar to those taken by Britain, the United States and China to mitigate the losses caused by the coronavirus, but the funds are not available, he said.
“If Turkey wants to get back on its feet quickly, it needs to find new credit sources,” he said. “But if they try to print more money as they have done until now, it will not end well.”
“Without getting bogged down in the details, the one way out seems to be the IMF’s compassionate embrace,” he said.
This could prove especially painful for Erdoğan’s government as it would be forced to open ledgers that had been kept secret from the government as the IMF would demand transparency before handing over cash, he said.