The turbulence in the Turkish economy, marked by a dramatic depreciation of the Turkish lira, is forcing Ankara to consider emergency measures. While President Recep Tayyip Erdogan led a campaign against the threat of dollarization, the government last week unveiled a package of measures to appease and buoy up economic actors. With the domestic market expected to shrink, the measures focus on encouraging exports and overseas contracting. As part of this drive to open up abroad and generate foreign exchange, the potential of Middle Eastern markets is remembered anew. Turkish traders and contractors had performed impressively in the region before wars and political conflicts hit economic ties. Whether and how they can revive that performance are issues with both economic and political question marks.

Erdogan’s call on citizens to convert dollar assets to Turkish liras appeared to bear fruit for a couple of days last week, but after regaining some ground against the dollar, the national currency began to slide again.

Prime Minister Binali Yildirim announced that some $10 billion had been converted to Turkish liras as part of the campaign, but soon it became clear that the shift was driven not by citizens, but by state banks and other public institutions converting their foreign exchange reserves to Turkish liras. After an initial retreat, the dollar rose again, fueled mostly by foreign investors exiting the Turkish stock exchange. The official sell-off figures were not yet announced at the time this article was written.

The sell-off seems to have been driven by the relative decline of the dollar price. How? Short-term foreign investments in Turkish stocks and government bonds amount to about $61 billion. These investments, however, are made in Turkish liras, and when investors want to go, they tend to await the right moment with more favorable exchange rates. Hence, the retreat of the dollar provided such a window of opportunity.