Turkey will fight slump in the lira, claims Finance Minister
Mr Albayrak described the lira’s weakness as “an attack” but said an action plan was ready
Turkey has drafted an action plan and will start implementing it on Monday to ease investor concerns, Finance Minister Berat Albayrak said on Sunday, after the lira plunged to a fresh record low in early Asia-Pacific trade.
In an interview with Hurriyet newspaper published online, Mr Albayrak described the currency’s weakness as “an attack”, echoing President Tayyip Erdogan – his father-in-law – but said the action plan was ready.
“From Monday morning onwards our institutions will take the necessary steps and will share the announcements with the market,” he said, without giving details on what the steps would be.
Mr Albayrak said a plan was prepared for banks and small to mid-sized businesses, which are most affected by the foreign exchange fluctuations. “We will be taking the necessary steps with our banks and banking watchdog in a speedy manner,” he said.
Mr Albayrak dismissed any suggestions that Turkey might intervene in dollar-denominated bank accounts, saying any seizure or conversion of those deposits into lira was out of the question.
The Turkish lira plunged to a fresh record low of 7.24 against the dollar during in Asia-Pacific trade, where markets were opening for Monday morning.
The currency has lost more than 45 per cent of its value this year, largely over worries about Mr Erdogan’s influence over the economy, his repeated calls for lower interest rates in the face of high inflation, and worsening ties with the United States.
On Friday, the lira tumbled as much as 18 per cent at one point, its biggest daily drop since 2001.
Earlier, Mr Erdogan stood by his opposition to high interest rates, saying they were an instrument of exploitation and that Turkey was not going to fall into this trap.
In the Hurriyet interview, Mr Albayrak said budget policies were important to support and strengthen the central bank’s monetary policies. “We will be entering a strong period in terms of fiscal policies.”.
Mr Erdogan, who has called himself the “enemy of interest rates”, wants cheap credit from banks to fuel growth, but investors fear the economy is overheating and could be set for a hard landing.
His comments on interest rates – and his recent appointment of his son-in-law as the finance minister – have heightened concerns that the central bank is not independent.
On Sunday, speaking to supporters in Trabzon on the Black Sea coast, Mr Erdogan dismissed suggestions that Turkey was in a financial crisis like those seen in Asia two decades ago.
The lira’s free-fall was the result of a plot and did not reflect the country's economic fundamentals, he said. “What is the reason for all this storm in a tea cup? There is no economic reason for this ... This is called carrying out an operation against Turkey,” he said.
The central bank raised interest rates to support the lira in an emergency move in May, but it did not tighten monetary policy at its last meeting.
Mr Erdogan repeated his call for Turks to sell dollars and buy lira to shore up the currency, while telling business owners not to stock up on dollars.
“I am specifically addressing our manufacturers: Do not rush to the banks to buy dollars. Do not take a stance saying ‘We are bankrupt, we are done, we should guarantee ourselves’. If you do that, that would be wrong. You should know that to keep this nation standing is also the manufacturers’ duty.”
Turkey’s latest row with the US over pastor Andrew Brunson has further weighed on the lira.
Updated: August 13, 2018 12:40 PM