The Turkish lira faces the risk of a steep devaluation if the government presses ahead with an expansionary fiscal policy that makes a loan deal with the International Monetary Fund unlikely, says Ulrich Leuchtmann, currency strategist at Commerzbank.
“The government is not prepared to accept the fiscal cuts demanded by the IMF, particularly given that the country is in the middle of an election campaign,” he says. “This year’s budget plan is not worth the paper it is printed on. Spending remained high in January and tax revenues have collapsed.”
