Will Qatar’s billions save the Turkish lira from collapsing?

Despite the strengthening of the Turkish lira recently, on the heels of the government and central bank measures, experts still consider that this rebound is temporary and the currency will drop to seven or eight lira against one US dollar.

Some of these experts are referring to the Qatari direct support extended by Emir Sheikh Tamim bin Hamad al-Thani when he visited Turkey on Wednesday, meeting with Turkish President Recep Tayyip Erdoğan, and pledging to inject 15 billion dollars in direct investment in Turkey, though financial experts believe that this won’t revive the Turkish currency, and will fall to new record lows.

The number of Qatari investments in Turkey is very small, compared to the size of the lira crisis and the size of foreign currency debt to the government, banks and private sector institutions.

Intermarket Strategy director Ashraf al-Ayedi said the effect of the Qatari support for Turkey is temporary, and won’t be of major help during the Turkish currency crisis.

He added that Qatar is investing and not injecting cash, while Turkey’s problem remains the high level of debts and Erdogan’s interference in monetary policies which is under the central bank jurisdiction, in addition to his refusal to raise interest rates.

Al-Ayedi said: “This year the lira might reach seven of eight liras against the dollar. Turkey and the emerging markets will face more pressure as the dollar continues to rise, and when the US central bank raises rates at the September meeting, the pressure on the Turkish lira will increase.”

"The $15 billion is enough to gain market confidence temporarily, nothing more. Part of the problem is the dollar’s rise,” Al-Ayedi told Al Arabiya English.

Turkey foreign debt is 53% of GDP, non-bank deposits in dollars are less than debt, and the difference between non-bank deposits versus exposure or loans and commitments is about $200 billion.

In the next 12 months, the non-financial private sector is required to repay debt or refinancing loans at $66 billion, and banks and the financial sector are required to repay $76 billion.

Also 67% of the total debt of the government or private sector are external debt and this will strengthen the demand for dollar and foreign exchange, while government debt stands at $95 billion.