Turkey’s lira may slide by 20 percent against the dollar this year as the latest intervention in the currency markets will likely prove futile, according to Capital Economics.

The lira will probably fall to 7.5 per dollar by the year-end from about 6 against the U.S. currency currently, Jason Tuvey, a senior emerging markets economist at the London-based firm, said in a report to clients published on Monday.

“The key risk is that the authorities hold on to the lira for too long, ultimately leading to a more disorderly adjustment in the currency,” Tuvey said. “This would particularly be painful given the context of Turkey’s large foreign currency debts.”

Turkish state-run banks have intervened to stabilise the lira in recent months by selling dollars, helping the central bank to slash interest rates and the government to offer cheap loans to consumers and businesses to boost economic growth. The lira slumped by 28 percent in 2018 after economic overheating and a political crisis with the United States sparked financial instability. It fell an additional 11 percent last year.

The lira traded down 0.4 percent at 6.03 per dollar as of 11:26 a.m. in Istanbul on Tuesday.

“These latest efforts to manage the lira are reminiscent of similar attempts last year,” Tuvey said. “In the run-up to local elections in March 2019, the central bank intervened to prop up the lira with the help of currency swap agreements. Once the elections were out of the way, intervention was scaled back and the lira subsequently fell by 10 percent against the dollar within the space of a month.”

Tuvey said the central bank has limited firepower to sustain a defence of the lira. While gross foreign exchange reserves total $106 billion, they are flattered by banks’ holdings of foreign currency at the central bank and net reserves total just $37 billion, he said. That compares with Turkey’s external financing needs over the next 12 months of about $190 billion.

“The central bank may be using currency swaps again, although it has diverted these operations to the stock exchange where there is little public information,” Tuvey said. “And indirect intervention through state banks cannot be maintained.”

Policymakers may be forced to raise interest rates later this year in the face of lira depreciation, he said.