Turkish lira collapses against the US dollar yet again

The Turkish lira has collapsed against the US dollar yet again after Turkish President Recep Erdogan dismissed the head of Turkey's Central Bank.

Mehmet Boynukalin, the imam of Istanbul's Hagia Sophia Mosque, urged to reduce the interest rate or even completely abolish it because lending money on interest comes contrary to the requirements of Islam.

"Reducing the interest rate and, finally, its complete abolition is a requirement of both Islam and reason," he wrote on his Twitter. "In countries with strong economies, interest rates range between 0 and 1%."

The Turkish lira declined after the unexpected resignation of Turkey's Central Bank on Friday, March 20. On Monday, March 22, the decline of the lira against the dollar exceeded 15 percent.

During the trading session, the Turkish currency fell to 8.485 lira per dollar. On Friday, March 19, the rate was at 7.2185. The intraday fall in the currency rate was the largest since August 2018, Bloomberg said. By the end of Monday, the currency climbed a little back and closed at the decline of 7.5 percent.

Turkish President Recep Tayyip Erdogan fired the head of the Central Bank, Naci Agbal, two days after the regulator raised the key rate from 17 to 19 percent. The central bank of Turkey said that tight monetary policy would be preserved until the authorities take control of the inflation. The current inflation rate in Turkey has already reached 15.6 percent.

The Turkish President has repeatedly opposed the rate hike.

Naci Agbala has served as the head of the Central Bank of Turkey for four months. Over the past two years, Turkey has seen three dismissals of the chiefs of the national Central Bank. The new chairman of Turkey's Central Bank is professor of banking Sahap Kavcıoğlu, who supports Erdogan's position.

  • It is worthy of note that one of the principles of the Islamic financial system is refusal to receive income in the form of interest on deposits and debts. In particular, Islamic banking excludes loans at interest. Transactions burdened with uncertainty, gambling, investments in the production of alcohol and tobacco, the processing and sale of pork are also prohibited.
  • Instead of issuing loans at interest, Muslim countries use mechanisms of partnership and income sharing from joint business or property usage.