The Turkish lira has dramatically fallen in recent days, “shedding nearly half its value against the dollar” amidst rampant inflation, The Wall Street Journal reports. Turkey’s economy, already battered by the pandemic and its aftermath, faces a new test in a declining lira, and experts fear the devaluation is going to continue to accelerate—especially as there are now fears of a run on the bank.

Zany Monetary Experiment

Due to the Turkish president’s economic policies—which The Economist has dubbed “a zany monetary experiment”—and broader economic headwinds facing many countries today, the lira is facing a very rocky road to recovery.

The crisis is mainly caused by Turkish President Recep Tayyip Erodgan’s economic theories. He argues that  higher interest rates cause inflation—and lower interest rates decrease inflation, a theory that “is the opposite of what economies around the world have experienced throughout history.”

President Erdogan’s unorthodox theory on high interest rates and inflation led to clashes with Lufti Elvan, Turkey’s former finance minister, who recently resigned. Erdogan named a loyalist, Nureddin Nebati, as the new finance minister. Elvan is not the only official Erdogan has clashed with. CNBC reports “rapid turnover at top economic positions, including Erdogan’s abrupt firing of three central bank governors in the last two and a half years.”        

The economic mismanagement has “left inflation stuck in double digits and official foreign reserves low,” impacting everything from the broader Turkish economy to how citizens spend. Costs of key imports like energy and food are expected to rise because of the crisis and purchasing power in Turkey is expected to be negatively impacted, according to The Wall Street Journal.

Turks Are Bailing on the Lira

The crisis has led to an alarming development: Turkish citizens are fleeing the lira in droves. “Nearly 60% of banking deposits are now in foreign currencies,” the Journal reports, raising fears that the mounting desperation could eventually cause bank runs in the Mediterranean country. While the threat of bank runs seems remote currently, the daily impacts of Erdogan’s unorthodox policies are being acutely felt.

For Emer, a retired nurse living on a monthly pension of 3,000 lira, the equivalent of $250, Erdogan’s policies are driving her into poverty. She tells The Economist that soaring prices are making her fall behind on electricity bills and loan payments. Middle class Turks, once the backbone of Erodgan’s conservative base, are becoming increasingly furious, abandoning Erdogan and his party as the crisis snowballs, according to the British newspaper, The Times.