Turkey’s lira has fallen to a record low as US sanctions and the effects of an overly politicized monetary policy kick in. President Erdogan’s virtual economics may be about to hit a wall of hard truths.

The Turkish lira fell to a rate of 5.1 against the dollar in early Friday trading, breaking the symbolic resistance threshold of 5 for the first time. The currency has lost 4 percent against the dollar over the last week and is down about 36 percent this year, according to FactSet.

The lira plummeted in late July after the Central Bank of the Republic of Turkey (CBRT) left interest rates unchanged as inflation continued to rise, with one analyst likening buying the currency to “catching a falling knife.”

The sense of doom was compounded on August 1 when the US imposed selective sanctions on Turkey over the detainment of an American pastor.

“Crucially, the geopolitical risks are now much higher following the decision by the US to impose sanctions on two Turkish ministers. Frankly, we do not know what level of real policy rate would compensate for this increase in risk premium,” Inan Demir, an analyst at Nomura, told DW.

The yield on the benchmark 10-year government bond was at 18.28 percent at Thursday’s close, indicating a big return for those willing to risk financing Turkey’s public debt.

Turkey is vulnerable to a stronger US currency because of its large dollar-denominated debt, which becomes more expensive to repay as the lira slips. Emerging economies have been struggling with a stronger dollar, but Turkey and Argentina are highly reliant on foreign — often dollar-denominated — funding, and so when their currencies sell off, it is more expensive to service debt.

Meanwhile, investors left the BIST 100 share index down 2.74 percent on Thursday.