Turkish Lira Declines to Weakest Since December Over Ukraine Concerns

A money changer holds Turkish lira banknotes at a currency exchange office in Ankara, Turkey September 27, 2021. REUTERS/Cagla Gurdogan
A money changer holds Turkish lira banknotes at a currency exchange office in Ankara, Turkey September 27, 2021. REUTERS/Cagla Gurdogan
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Turkish Lira Declines to Weakest Since December Over Ukraine Concerns

A money changer holds Turkish lira banknotes at a currency exchange office in Ankara, Turkey September 27, 2021. REUTERS/Cagla Gurdogan
A money changer holds Turkish lira banknotes at a currency exchange office in Ankara, Turkey September 27, 2021. REUTERS/Cagla Gurdogan

The Turkish lira declined for a seventh straight day on Wednesday, bringing its losses to more than 5% since Russia launched its attack on Ukraine, raising inflation and current account risks for Turkey.

The lira lost around 1.3% to stand at 14.6505 against the dollar by 0844 GMT, its weakest since Dec. 20, when the government announced a plan to protect lira deposits against currency depreciation.

In the first two months of the year, authorities were able to hold the lira in a tight band through costly interventions in the foreign exchange market and the lira protection scheme.

The currency blew through 14 against the dollar when volatility returned in late February as the tensions between
Moscow and Kyiv rose, before rebounding.

The lira is now down some 10% since the end of 2021, a year in which it shed 44% of its value against the dollar.

The currency crisis was sparked by a central bank easing cycle, that saw the policy rate reduced 500 basis points to 14% since September.

Under the lira protection scheme, the Treasury makes up for the difference between the interest rate on lira deposits and the currency's depreciation on the maturity date.

Reuters quoted Enver Erkan, chief economist at Tera Brokers, as saying that the lira's depreciation is already putting pressure on public finances as the currency's depreciation is higher than periodic yields, and the lira deposit scheme was becoming less sustainable.

"The burden on public finances means more indirect taxes or monetary expansion, which could lead to an inflationary spiral," he said.

The interest rate cuts were part of President Recep Tayyip Erdogan's new economic plan that aims to turn Turkey's chronic current account deficits to a surplus, raise growth, employment and exports while keeping low rates.

But the rise in commodity prices from oil to wheat due to Russia's invasion of Ukraine are likely to lead to a larger
deficit, while also further stoking inflation - already at 54%.

Tera's Erkan said if there is a slowdown in the European industry due to the energy crisis, Turkey's exports could also decline, risking a wider current account deficit.

Economists have said a rate hike is not in the cards, given Erdogan's aversion to high borrowing costs.

"I think there should be a change in (the central bank's) strategy given that keeping rates stable now is remaining behind the curve," Erkan said, noting there has been no signal from authorities of a return to orthodox policies.



Saudi Arabia Unveils Pavilion at International Defense Exhibition and Conference in UAE

The Saudi pavilion is showcasing the latest technologies and advanced systems, underscoring the significant progress the Kingdom has made in localizing military industries, in alignment with the objectives of Saudi Vision 2030. (SPA)
The Saudi pavilion is showcasing the latest technologies and advanced systems, underscoring the significant progress the Kingdom has made in localizing military industries, in alignment with the objectives of Saudi Vision 2030. (SPA)
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Saudi Arabia Unveils Pavilion at International Defense Exhibition and Conference in UAE

The Saudi pavilion is showcasing the latest technologies and advanced systems, underscoring the significant progress the Kingdom has made in localizing military industries, in alignment with the objectives of Saudi Vision 2030. (SPA)
The Saudi pavilion is showcasing the latest technologies and advanced systems, underscoring the significant progress the Kingdom has made in localizing military industries, in alignment with the objectives of Saudi Vision 2030. (SPA)

The activities of the Saudi pavilion, organized by the General Authority for Military Industries (GAMI), kicked off on Monday at the International Defense Exhibition and Conference "IDEX 2025" in Abu Dhabi. This event is being held under the patronage of Sheikh Mohamed bin Zayed Al Nahyan, President of the United Arab Emirates.

Governor of GAMI Eng. Ahmad Abdulaziz Al-Ohali participated in the launch, in the presence of Lt.-Gen. Mohammad Bin Abdulrahman bin Hamed Al-Gharibi, Chief of Staff of the Royal Saudi Naval Forces, Sultan bin Abdullah Al-Angari, Saudi ambassador to the UAE, and a number of officials, international investors and decision-makers in the sector.

Al-Ohali emphasized the significance of the Kingdom's participation in IDEX 2025 as a leading global platform for showcasing the latest military technologies.

He underscored the importance of establishing international partnerships that enhance the Kingdom's defense and security capabilities.

The Saudi pavilion serves as a strategic window that reaffirms the Kingdom's commitment to developing its defense sector and strengthening national competencies, contributing to the ambitious goal of localizing over 50% of military spending by 2030, he added.

During the exhibition, GAMI signed a cooperation agreement in the field of government quality assurance with the Defense Acquisition Program Administration in South Korea.

The agreement aims to boost the assurance and reliability of defense products and services carried out under purchasing and acquisition operations, in accordance with the local laws and regulations of both sides.

The agreement reflects the mutual desire of both parties to deepen joint cooperation in the field of defense industry and technology, in a way that achieves the national interests of both countries. The two parties also intend to expand the scope of cooperation by exchanging experiences and best practices in the field of government quality assurance for defense products and services.

The Saudi pavilion is showcasing the latest technologies and advanced systems, underscoring the significant progress the Kingdom has made in localizing military industries, in alignment with the objectives of Saudi Vision 2030.

It is presenting the latest locally developed defense technologies across military, defense, and security industries. It features a variety of military products aimed at highlighting the capabilities of the defense and military sectors. Additionally, it presents investors with a conducive investment environment and the promising opportunities available in the sector.

In addition to GAMI and the General Authority for Defense Development (GADD), the pavilion includes the World Defense Show (WDS), along with several national companies operating in the military industries sector. The companies include the Saudi Arabian Military Industries (SAMI), the National Company for Mechanical Systems (NCMS), the Middle East Propulsion Company (MEPC), the Saudi Chemical Company Holding (SCCH), AlKorayef Group, Life Shield Military Industries (LIFE SHIELD), Emaan International, QUDRA Industrial Company, and the Saudi Company for Aircraft Maintenance and Preparation (GDC).