The Turkish lira has lost nearly 20% of its value since the beginning of this year, having dropped by more than 6% in a single day yesterday. The declining value has led to the highest exchange rate on record as the currency loses spending power against the pound.
This is great news if you're planning a trip to Turkey as your money will stretch further than ever before.
The lira's declining value
The lira has been in a steady state of decline since 2021 after President Erdogan ordered Turkey's central bank to slash interest rates in an attempt to curb high inflation, which had reached 20% in October 2021.
Erdogan's move was seen as unconventional by many economists, including those in his own government, who argued that cutting interest rates would lead to higher inflation as people were more likely to spend money and less likely to save it.
Inflation began to soar after Erdogan's intervention, peaking at 85% in October 2022 and eroding the value of the lira by over 50% in just 12 months.
Over the same period, the lira exchange rate increased from £1 = ₺11.6 in October 2021 to £1 = ₺20.7 in October 2022 as the declining currency lost value against the pound.
Today, one pound is worth a record 27.3 lira; up 20% since the beginning of this year and 123% since 2018.
Why is the Turkish lira exchange rate still rising?
President Erdogan was re-elected on 28 May 2023. After his re-election, Erdogan appointed a new economic team to loosen financial restrictions that had previously slowed the currency's fall.
Analysts believe Erdogan's government propped up the lira in the run-up to Turkey's elections last month, using foreign currency reserves to keep the exchange rate under control.
On Saturday, Erdogan reappointed Mehmet Simsek, an internationally respected former banker, as treasury and finance minister in his new Cabinet. Simsek told reporters that economic policy needed to return to 'rational' ground, which was viewed as a sign that Erdogan's new administration might pursue more conventional economic policies and abandon state intervention in favour of allowing the market to determine a fair value for lira.
This U-turn in government policy, combined with concerns over Turkey's economic stability and rising inflation have weighed heavily on investor confidence and led to a mass exodus of foreign capital, causing the lira's value to slide even further.
The outlook remains uncertain for the lira as many economists believe the currency is still overvalued and may fall even further.
What this means for holidaymakers
If you're planning a trip to Turkey this summer, you'll benefit from record high Turkish lira exchange rates which means one pound will buy more lira than ever before.
Our currency comparisons can help you to get the best Turkish lira exchange rate. We compare the lira rates from the UK's biggest currency providers so you can find the top deals after costs.