Turkey announces exemptions to foreign currency contracts ban

ISTANBUL-Reuters

Turkey has announced exemptions to its ban on using foreign currencies in business agreements, including export-related contracts, capital market instruments and employment contracts involving foreigners, the Official Gazette said.

The government said last month property sales, leasing transactions and rent contracts must be in lira, halting the use of foreign currencies for such deals to support the lira, which has lost 38 percent of its value this year.

The currency has been hit over various concerns, including a diplomatic spat with the United States. The lira was at 6.15 against the dollar on Oct. 8, easing from a close of 6.1205 on Oct. 5.

The Official Gazette said on Oct. 6 the exemptions would also cover areas such as sales of software produced abroad, ship leasing contracts and contracts involving state institutions, if they are not related to property or employment.

If there is failure to renegotiate a contract currently in foreign currency it will be converted to lira at the official exchange rate of Jan. 2 and raised in line with consumer price inflation rates.

The lira stood at 3.8 against the dollar at the start of the year but has since slumped to 6.15. The currency was at 4.5 against the euro at the start of the year and is now at 7.08.

The exemptions were put on a Sept. 13-dated decision, in which the government said any contracts previously made in foreign currency but which are currently in effect must be converted into liras within 30 days.

Real estate sales and rental deals in foreign currency are common in Turkey, particularly in the retail sector.

Turkey’s shopping mall industry has more than $15 billion of debt, which firms could struggle to repay if they are unable to generate foreign currency revenues, according to sector representatives.