Turkey's economy has wavered on the edge of crises for the past several years, magnifying the impact of Turkey's debt load. At first, a currency crisis in 2019 prompted a significant drawdown of the country's foreign currency reserves to prop up the flagging value of the lira. After some replenishment in the intervening years, the central bank engaged in similar interventions in 2022 and early 2023 to support the Turkish lira, further drawing down reserves. Most of Turkey's external debt is denominated in foreign currency, creating a liability for Turkey because the country must pay back its debts in foreign currency regardless of the volatility of the Turkish lira. Following elections earlier this year, Turkey appears to be beginning a more technocratic strategy to try to stabilize its economy and reduce the liabilities of its debt load, but the sustainability and impact of this shift remain unclear, especially with political interference driving policy at the central bank.
