The Turkish Lira hit a record low against the dollar on Monday after the US Trade Representative’s office said it was reviewing Turkey’s duty-free access to the American market, which is seen as part of a countermeasure against Turkey after Ankara imposed retaliatory tariffs on US goods in response to American tariffs on steel and aluminium.
The lira’s collapse to a record low marks a possible loss of $1.7 billion in Turkish exports as the historically volatile currency has lost 27% of its value in 2018, mostly due to concerns about President Recep Tayyip Erdogan’s increasingly authoritarian grip over monetary policy and his jailing of an American Protestant minister.
On Monday, the lira fell by5.5% to a record low of ₺5.4250 against the dollar, marking the greatest single-day drop in nearly two decades.
The earlier sell-off prompted Turkey’s central bank to step in and loosen the upper limit of the banks’ reserve requirements and causing the frail lira to also hit a record low against the euro, which closed at ₺6.09 to €1 by the end of trading on Monday.
The deepening crisis between the two NATO allies stems from Turkey’s arrest of an American Protestant Evangelical pastor, Andrew Brunson, who has been accused of being a terrorist with ties to Erdogan’s long-time political nemesis and perpetual boogeyman for Erdogan and his AK Party, Fethullah Gülen, and pro-independence Kurdish groups that Erdogan believes are as a great a threat to Turkey as ISIS and other militant groups.
Gülen, a 77-year-old Islamic cleric who has lived in self-imposed exile in the United States for more than 20 years, was once an ally of Erdogan and the conservative Islamist AK Party establishment, but the two later fell out over Erdogan’s authoritarian tendencies. Following Turkey’s foiled 2016 coup, Erdogan ordered a Stalin-line purge of the entire state apparatus. Despite scant evidence tying them to either Gülen or the coup plotters, Erdogan and fired over 100,000 civil servants and jailed 40,000 others, including hundreds of journalists and human rights activists, for their alleged ties to theGülen’s Hizmet movement.
Brunson has been sitting in a Turkish prison since October 2016 after he was accused of helping members of the Hizmet Movement and the banned Kurdish organisation known as the PKK, which the Turkish government considers a terrorist organisation, under the guise of missionary work.
US President Donald J. Trump and Erdogan reportedly had come to a verbal agreement earlier in the year for Brunson’s release. The deal would have seen Hakan Atilla – the deputy CEO of Turkish state lender Halkbank, released from a US prison, where he is serving time for violating the sanctions regime against Iran.
Erdogan, however, has denied that such a deal was in place, and has insisted that Brunson would only be released if the US government hands over Gülen. “They tell us to give the pastor back. You have one pastor [Fetullah Gulen] as well. Give him to us. Then we will try him (Brunson) and give him to you. The pastor we have is on trial. Yours is not – he is living in Pennsylvania. You can give him up easily. You can give him right away.”
The potential massive loss for the Turkish economy if they are blocked from having duty-free access to the US market would come less than a year after Ankara benefited handsomely from the Generalized System of Preferences, a US trade programme designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries.