Question: The Turkish Lira has plunged to its lowest levels in a short period, losing more than 30% of its value in less than two months and over 45% since the beginning of this year. Inflation has doubled to about 21%, and prices have risen significantly. Notably, the currency has been in a continuous decline since 2013. What are the causes of this? How can this crisis be treated and the decline stopped? And what are its implications for the 2023 elections?
Answer: To understand the causes and repercussions of this, we review the following points:
Indeed, the currency has lost about 45% of its value against the Dollar since the beginning of the year, and about 30% since the end of October. All of this is due to high indebtedness, the maturity of urgent debts, and the inability to pay the debt when it falls due; these factors play a major role in the currency’s devaluation. According to the Turkish Ministry of Finance on 31/03/2021, the external debt reached approximately $448.4 billion, with the principal debt being $262.1 billion, which doubled due to riba (interest) alongside debt insurance payments. The urgent debts that Turkey is required to pay within one year reached about $168.7 billion. To pay off debts, it needs to borrow from other parties, and thus remains trapped in a cycle of debt repayment. It appears there is an inability to pay these urgent debts, which are paid in hard foreign currencies as is well known. The debt repayment scheduling pressures the Turkish economy. The payment deficit rose last October from $3.7 billion to $12 billion in November. The deficit for this December is expected to be around $10.4 billion. It is anticipated that the deficit until the coming summer months will average $9 billion per month, according to the expectations of some Turkish economists working in banks. Erdogan tried to blame unknown parties who buy foreign currencies and withdraw them from the markets so they do not reach the Central Bank. Erdogan ("commissioned the State Audit Board to identify institutions that bought large amounts of foreign currency and determine whether any manipulation had occurred." He said, "Our country is fighting an economic war of independence and will not submit to pressure to change course. We are witnessing manipulation around the exchange rate, interest rates, and price hikes by those who want to take Turkey out of the equation"... Asharq Al-Awsat, 27/11/2021). All of this talk is an attempt to evade responsibility and cover up the truth. The deficit is real, and the door has been opened wide for various parties to take external loans with riba, whether those parties are the state, companies, or individuals through credit cards. Debts are paid in foreign currencies, causing a real crisis: the currency devalues and poverty increases. The creditor banks and financial institutions will fill their coffers, and their countries—especially the colonialist ones—will increase their interference in the country's affairs and impose more hegemony over it.
As a result, prices have risen strikingly. The Turkish Statistical Institute announced on 03/12/2021 that ("the country's annual inflation rate reached 21.31% during the month of November"... Anadolu Agency, 03/12/2021). This leads to economic contraction, and this rate is four times higher than the target set by Erdogan's government, making the cost of living exorbitant for many families and leaving many people unable to repay their debts. The Presidency of Strategy and Budget of the Republic of Turkey announced in a report issued on 02/12/2021 (that the number of consumers unable to pay their riba-based debts rose this year to 127.2% compared to last year. Note that the number of people using credit cards or riba-based lending in Turkey—i.e., those who borrow with interest—is about 35 million people. Treasury and Finance Minister Lutfi Elvan stated that "the number of people using credit cards is 34,119,250 people, and they owe debts amounting to 874 billion and 300 million Turkish Liras"... BBC Turk, 14/09/2021).
The state, its president, and its institutions encourage people to consume to achieve economic growth. This prompts them to borrow, which can only be done through harmful and forbidden riba. This is not changed by the Central Bank lowering the interest rate at Erdogan's request from 24% to 19%, then down to 15% in recent months. The President tried to exploit the feelings of Muslims by saying before his parliamentary party group on 17/11/2021: ("Interest is the cause and inflation is the result, therefore we will fight inflation and we will not let interest crush our people"...). There is no difference in riba whether it is 24%, 19%, or 15%; riba, whether a little or a lot, is haram (prohibited). Whoever consumes it, legitimizes its consumption, and encourages it has declared war against Allah and His Messenger. He has entangled the majority of the people in riba throughout the 19 years of his and his party’s rule since 2002, on the basis that he is "Islamic"! He encouraged loans based on interest to move the wheel of the economy and increase growth, which means increasing market activity in terms of buying, selling, and investment, and reducing unemployment. But all of this turned against the people of Turkey when they turned to consumption through riba-based debt. Their poverty and misery increased, while the owners of capital became richer. People began to grumble, voices began to rise against him, and his popularity began to drop to low levels, while the presidential elections are around the corner, scheduled for 18/06/2023. The secular democratic capitalist system currently applied in Turkey is the primary driver for the spread of riba because it is one of the pillars of this system.
The President dismissed the former Central Bank Governor, Naci Agbal, on 19/03/2021, who defended a high-interest policy, and appointed Sahap Kavcioglu in his place. His task was to lower the riba rate and work on restoring price stability while maintaining economic vitality before the upcoming parliamentary and presidential elections. Central Bank Governor Sahap Kavcioglu said ("The aim of the Central Bank's intervention in the currency markets is to eliminate the fluctuations occurring in the market. We will notice the cumulative effects of our current monetary policy stance in the first half of 2022"... Anadolu Agency, 02/12/2021). Erdogan also dismissed Treasury and Finance Minister Lutfi Elvan and appointed Nureddin Nebati in his place, as announced in the Turkish Official Gazette on 02/12/2021. Note that he had appointed him only one year prior after dismissing his son-in-law, Berat Albayrak, on 09/11/2020. This indicates instability in direction and confusion in policy and the proposal of solutions, and an attempt to blame failure on other individuals he himself appointed.
Erdogan continues to serve US policies in the region and achieve its interests; he is completely within its orbit. In exchange, the US works to support him in various ways. For this reason, international credit rating agencies—which are American companies—published positive reports in favor of Erdogan. The American agency S&P Global Ratings published its expectations regarding Turkish economic growth on 01/12/2021 (raising its expectations for Turkey's economic growth this year by 1.2 points to 9.8%, while increasing its growth forecast for 2022 by 0.4 points to 3.7%. It had previously published expectations in September for Turkey's economic growth for 2021 at 8.6%... Anadolu Agency, 01/12/2021). This was followed by the American agency Fitch Ratings on 02/12/2021, which published a statement reviewing positive assessments regarding the Turkish economy. Its statement mentioned that Turkey's economy is expected to grow this year by 10.5% instead of 9.2%, which the agency had announced in September. It also raised its expectations for Turkey's economic growth for 2022 from 3.5% to 3.6%. It maintained Turkey's credit rating at (BB-). The agency's statement noted (that "Turkey's economic growth is strong compared to its peers, but per capita income has been trending downward since 2013 in dollar terms"... Anadolu Agency, 03/12/2021). On 03/12/2021, the American agency Moody's kept its rating at B2 with a negative outlook, and noted (that Turkey's main external vulnerability risks have decreased due to the current account deficit, supporting the gradual restructuring of foreign exchange reserves on a gross and net basis, regardless of the current weakness in the local currency, the Lira... and that Turkey enjoys a large and diverse economy, and it is expected that the country's economy will grow by 11% this year and 4% during 2022. The agency had predicted in its report published last November that the Turkish economy would grow by 9.2% this year... Anadolu Agency, 04/12/2021). These reports from international American rating companies are considered support for Erdogan. This means America wants him to succeed in the upcoming elections, as he provides services to it and no strong alternative to him has appeared on the scene so far.
The Turkish President is trying to support the economy and maintain the currency’s value by bringing in foreign investment and seeking Turkish investments abroad, and he is now turning toward the Gulf states. For this reason, he courted the UAE, with which he had long traded insults. Crown Prince of Abu Dhabi, Mohammed bin Zayed, arrived in Turkey on 24/11/2021 on an official visit following an invitation from President Erdogan. Note that they had held a phone call on 31/08/2021 during which they discussed bilateral relations and regional issues. Following this, Turkish Foreign Minister Mevlut Cavusoglu indicated that a positive atmosphere has recently prevailed over Turkish-UAE relations. During this visit, Turkey and the UAE signed 10 agreements in various fields in the presence of Erdogan and Bin Zayed. Afterward, Bin Zayed wrote on his Twitter account: "I met Turkish President Erdogan in Ankara today and we held fruitful talks. The talks focused on opportunities to strengthen our economic relations," while the Chairman of Abu Dhabi Developmental Holding Company, Mohamed Hassan Alsuwaidi, said: ("The UAE decided to allocate $10 billion for investment in Turkey." The Turkish Foreign Minister announced that he would visit Abu Dhabi next month... Anadolu Agency, 24/11/2021). Following this, the Turkish Lira rose slightly against the dollar, then resumed its decline. For over a year, Erdogan has been working on reconciliation with the regimes he was at odds with in the region; because his disputes are not based on principle, but rather relate to interests and policies linked to America, in whose orbit he moves. The UAE has normalized with the Jewish entity, and Erdogan is also a normalizer and confirms normalization. They and other regimes in the region are conspirators against Palestine and are silent about its usurpation by the Jews.
The Turkish President headed to Qatar on 06/12/2021, although the visit came at the invitation of the Emir of Qatar to participate in the seventh meeting of the Supreme Strategic Committee between the two countries. Erdogan said in a press conference before heading to Qatar: ("The volume of projects implemented by Turkish businessmen in Qatar is about $15 billion." He said: "The two countries have strengthened their partnership on the basis of mutual benefit in many fields from economy to defense, and from trade to investment." He added: "We will continue to develop our relations with our brothers in the Gulf without discrimination within the framework of our common interests and mutual respect"... Anadolu Agency, 06/12/2021). Qatari Foreign Minister Mohammed bin Abdulrahman Al Thani said in a press conference with his Turkish counterpart Mevlut Cavusoglu ("it is expected that 12 agreements will be signed between Turkey and Qatar during the seventh session of the Strategic Committee" just before Erdogan's visit to Doha... Anadolu Agency, 06/12/2021). Then 14 cooperation agreements were signed between Qatar and Turkey: (Qatar and Turkey sign 14 agreements and Erdogan confirms Ankara's keenness to cooperate with Gulf countries... The works of the seventh session were held under the chairmanship of the Emir of Qatar Sheikh Tamim bin Hamad Al Thani and President Erdogan who is visiting the Qatari capital, Doha. The two sides signed 14 cooperation agreements in various fields such as economy, investment, industry, defense, security, endowments, media, culture, and sports... Al Jazeera + Anadolu Agency, 07/12/2021). These are attempts by Erdogan to support the Turkish economy and try to prevent the collapse of the Turkish Lira.
It is not likely that the currency collapse will stop soon. Attempts have been and are being made to stop its collapse, but to no avail because the basis upon which these attempts are built is corrupt and invalid. The Lira had previously collapsed to the level of 1,797,000 Liras at the end of 2004, and a decision was made to remove six zeros starting from 01/01/2005, making the dollar equal to 1.79 Liras, but it did not remain stable for long. Since 2013, the Lira’s value began to fall, and the fall accelerated. The Lira's collapse is related to the deteriorating state of the Turkish economy. The reasons for the deteriorating Turkish economy go back primarily to the foundations it is built upon and the policies applied accordingly. If these foundations are not treated, the people will continue to be burned by the fire of this system upon which the economy is based and will suffer. It is based on invalid capitalist foundations. It relied on increasing production and growth and encouraging consumption. To this end, Erdogan and his secular regime opened the door to debt and taking riba-based loans, even though it is strictly prohibited in Islam. They opened the door to foreign investment such that these companies establish public projects like building bridges, roads, tunnels, metros, and airports. These private companies, including foreign ones, collect money from the general public and reap profits from them. Note that these are public utilities that the state must provide for free to all people as Islam commands. The solution to the economic problem lies in the distribution of public funds and benefits to all members of the citizenry and enabling them to benefit from them. It must guarantee the satisfaction of all basic needs for all individuals of society, one by one, completely, and ensure that every individual is enabled to satisfy luxury needs at the highest level as stipulated in the articles of the Islamic Constitution derived from the Book and the Sunnah. At the same time, the Turkish Lira must be unlinked from the Dollar, and its basis must be gold and silver according to the Shariah rulings. Linking the economy to the outside and to debt is a dangerous and destructive matter, especially when it is through riba. Allah has threatened those who deal in riba with a war from Him, the Exalted, and His Messenger ﷺ. The Almighty said:
يَا أَيُّهَا الَّذِينَ آمَنُواْ اتَّقُواْ اللّهَ وَذَرُواْ مَا بَقِيَ مِنَ الرِّبَا إِن كُنتُم مُّؤْمِنِينَ * فَإِن لمْ تَفْعَلُواْ فَأْذَنُواْ بِحَرْبٍ مِّنَ اللّهِ وَرَسُولِهِ وَإِن تُبْتُمْ فَلَكُمْ رُؤُوسُ أَمْوَالِكُمْ لاَ تَظْلِمُونَ وَلاَ تُظْلَمُونَ
"O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers. And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal - [thus] you do no wrong, nor are you wronged." (TMQ Al-Baqarah [2]: 278-279)
And He, the Exalted, has given glad tidings of happiness to those who follow His guidance, and misery to those who turn away from the guidance, saying:
فَمَنِ اتَّبَعَ هُدَايَ فَلَا يَضِلُّ وَلَا يَشْقَى * وَمَنْ أَعْرَضَ عَن ذِكْرِي فَإِنَّ لَهُ مَعِيشَةً ضَنكاً
"Then whoever follows My guidance will neither go astray [in the world] nor suffer [in the Afterlife]. And whoever turns away from My remembrance - indeed, he will have a depressed life." (TMQ Taha [20]: 123-124)
In conclusion:
هَذَا بَيَانٌ لِلنَّاسِ وَهُدًى وَمَوْعِظَةٌ لِلْمُتَّقِينَ
"This [Qur'an] is a clear statement to [all] people and a guidance and instruction for those conscious of Allah." (TMQ Aal-Imran [3]: 138)
7th Jumada al-Ula 1443 AH 11/12/2021 CE