Currency crisis is coming! The exchange rates of Turkey, Lebanon and other countries hit record lows

Economies around the world are being squeezed by price pressures due to supply chain bottlenecks and shortages of raw materials. It is worth mentioning that Turkey, Lebanon, Nigeria and other countries have fallen into a serious currency crisis. Foreign trade people are in an emergency to avoid lightning, and they need to pay special attention to the risk control of delivery and collection.

Turkey depreciates by more than 43%

Recently, the Turkish lira has fallen sharply against the U.S. dollar again.

The huge earthquake in Turkey's foreign exchange market and stock market continues. Inflation and currency devaluation have brought huge challenges to the current Turkish economic development, making the Turkish government "restless". Because, before that, the Turkish government has used a series of unconventional means to try to stabilize the lira.

In order to stabilize the value of the lira, the Turkish government has stepped up its intervention in the foreign exchange market. Turkey's central bank has sold at least $4 billion in foreign currency.

Recently, Turkish President Recep Tayyip Erdogan said at a cabinet meeting that the government will take measures to restore the inflation rate to single digits as soon as possible. And announced a series of reform measures, including launching economic policy reforms to develop the economy through investment, employment, production, and exports. These measures are aimed at improving the shortage of domestic material supply, earning more foreign exchange by strengthening exports, and enhancing the economy's ability to resist risks.

It is reported that Turkey has already started raising the minimum wage to 4,250 liras in January, an increase of 50%. At the same time, the state's subsidy rate for the personal pension system will be greatly increased from 5% to 30% to reduce the pressure on people's living costs.

The latest data from the National Bureau of Statistics of Turkey shows that the country's consumer price index in 2021 will increase by 36.08% compared with 2020, and the price index of expenditure items such as food, transportation, and living energy will increase significantly. At the same time, the Turkish lira continued to depreciate, with a double-digit drop against the U.S. dollar in the fourth quarter of 2021.

Lebanese pound exchange rate hits new low

As Lebanon is in deep economic distress, on the 10th local time, the black market exchange rate of its local currency, the Lebanese pound against the U.S. dollar, fell below 31,000 to 1, a record low.

Lebanon has implemented a fixed exchange rate policy of pegging the Lebanese pound to the US dollar in 1997, and the official exchange rate has been maintained at 1507.5 to 1. Since the banking crisis in September 2019, the black market exchange rate of the Lebanese pound against the US dollar has continued to depreciate.

In the past two years, affected by multiple political and economic crises, the exchange rate of the Lebanese pound against the US dollar has fallen by more than 95%. At the beginning of 2022, the Lebanese pound has already fallen below the historical record three times.

Although many things will become cheaper for foreign tourists, the quality of life for their natives is rapidly declining.

This Sunday, the Lebanese government will hold talks with a visiting IMF delegation to discuss countermeasures against the crisis.

To make matters worse, Lebanon is mired in a power crisis due to fuel shortages. The country's electric power company can only maintain municipal power supply for 4 hours a day, and residents of Li have to rely on private generators to generate electricity.
Nigeria's exchange rate falls by a record

The Nigerian currency also fell to a record low in the spot market. As at 31, 2021, the naira, managed by the Central Bank of Nepal, fell 2.2% to a record 424.27 against the US dollar.
It was the biggest drop in the official exchange rate since 2021. In fact, the Naira has been weakening every year since 2012. The Central Bank of Nigeria has been selling dollars to investors at 437 to 444 naira per dollar since early October this year.

The Nigerian central bank has devalued the naira three times since March 2020 as lower oil revenues weighed on the country's foreign exchange reserves.

The International Monetary Fund and the World Bank have repeatedly called for the central bank to consolidate multiple exchange rates, but analysts believe it is unlikely that the central bank will do so in the year before the election, which is a huge political risk

In this regard, Muda Yusuf, CEO of the Nigeria Private Enterprise Promotion Center, emphasized that national economy managers should take measures to mitigate the impact of the current foreign exchange crisis on real sector operators. He suggested adopting a flexible exchange rate mechanism to improve liquidity in the foreign exchange market, reduce uncertainty, and enhance investor confidence.

At the same time, it is suggested that a flexible exchange rate policy mechanism should be adopted. This is not advocating currency devaluation. On the contrary, this is a pricing mechanism that reflects the fundamentals of supply and demand in the foreign exchange market. This is a sustainable, predictable and transparent model.