(Bloomberg) -- President Recep Tayyip Erdogan blamed a sharp slump in the lira on “money barons” attacking Turkey’s economy, vowing to pursue lower borrowing costs to turbo-boost growth and revive his flagging popularity ahead of elections in 2023. 

The currency dropped as much as 4.5% following his remarks and traded 4% lower at 12.4766 per dollar at 5:51 p.m. in Istanbul. It has lost a fifth of its value in the last two weeks alone.

Erdogan’s Rate Cut Mantra Spurs Lira’s Worst Run in 20 Years

Speaking to supporters in the western province of Izmir on Friday, Erdogan doubled down on a newly unveiled policy that prioritizes lower interest rates to charge up growth and job creation. 

This week’s plummet in the lira has no economic basis and is the result of a financial sabotage, the Turkish leader said in televised comments. The attacks are being staged by “global barons of politics and money” and their domestic supporters who want Turkey to keep interest rates high, he said.

“We’ll not give up our new economic program no matter what they do,” Erdogan said. “They are trying to create a dark scenario using foreign-exchange levels.” A day earlier, the national security council, chaired by the president, said challenges to the policy shift were one of the threats facing the country, along with terrorist activities.

Old Tactics

Erdogan espouses the unorthodox mantra that high interest rates fuel inflation rather than curbing it. His determination to drive down borrowing costs with inflation at 20% has pushed Turkey into new territory, with many analysts questioning whether the fallout will affect his grip on power. 

The currency’s rapid depreciation drives up the cost of goods for citizens, with his own working class base clobbered the hardest, and poses risks to the banking sector. 

But Erdogan is maintaining a passionate defense of his recent pivot despite the immediate financial turmoil it unleashed. It’s reminiscent of the public narrative his former finance minister -- and son-in-law-- Berat Albayrak maintained in the wake of a currency crisis in 2018. 

Back then, Erdogan and Albayrak blamed foreign powers for trying to undermine Turkey’s economy by engineering a run on the lira, and restricted banks’ foreign currency swaps with their overseas counterparts to bolster the currency.

During the next two years, policy makers presided over an foreign-exchange intervention policy that -- in Erdogan’s own words -- ended up burning through $165 billion to support the lira.

Facing dismal opinion polls, Erdogan has embarked on a renewed push to create employment by forcing the central bank to lower interest rates. The regulator has cut the benchmark by a total of 4 percentage points since September.

Erdogan’s Lira Experiment Tests His Grip on Turkey

The 2023 election will be the first since Erdogan’s ruling party suffered shock defeats in municipal votes two years ago, when key battlegrounds including Istanbul and the capital Ankara were lost to the opposition for the first time in a quarter century. 

Recent opinion surveys show his support is even lower now, with around two-thirds of the population seeing no hope for economic improvement over the next year.

“We didn’t think of this new economic policy in the morning and decide to put it into action in the evening,” Erdogan said. “We’ve been preparing for it for the past 19 years,” promising companies and workers they’d be better off.

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