Turkish Central Bank acts on rediscount credits to stem lira’s fall

ANKARA

In a new measure aiming to curb Turkish Lira’s decline, the Central Bank has decided to allow exporters to repay foreign currency-denominated loans in the local currency. 

“It has been decided that the repayments of rediscount credits for export and foreign exchange earning services that have been extended before 25 May 2018, which will be due by 31 July 2018 (included), can be made in Turkish liras at an exchange rate of 4.2 to the USD, 4.9 to the Euro, and 5.6 to the GBP, provided that they are paid at maturity. In case the exchange rate on the date of credit extension is higher than these rates, the exchange rate on the date of credit extension will be applicable in credit repayment,” the Bank said in a statement on May 25.

The Bank’s Monetary Policy Committee (MPC) had held an extraordinary meeting on May 23 to raise the top interest rate from 13.5 percent to 16.5 in a bid to halt the plunging value of the lira.

The lira hit the record low of 4.92 against dollar on May 23, with a daily decline of 5 percent before the MPC meeting.

After the rate hike decision the lira gained strength to 4.55 against the dollar but it weakened near 4.8 on May 24.

The lira has lost more than 20 percent of its value against the dollar since the start of the year.

Concerns about management of the economy and the independence of the Central Bank after the snap elections on June 24 are said to be affecting the depreciation of lira, alongside high inflation, a rising current account deficit, and the rally of the dollar.