Tue, Oct 09, 2018 - Page 10 News List

Turkey eases ban on FX contracts

DIRE STRAITS:The Turkish lira has lost 38 percent of its value this year, while inflation hit a 15-year high last month, reaching nearly 25 percent on an annual basis

Reuters, ISTANBUL, Turkey

High-rises in the Levent business district are pictured behind the Bogazici University campus and an Ottoman-era fortress in Istanbul, Turkey, on June 25.

Photo: AP

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

The currency has been hit concern over Turkish President Recep Tayyip Erdogan’s influence over monetary policy and a diplomatic spat with the US.

The lira traded at 6.18 against the US dollar yesterday afternoon, easing from a close of 6.1205 on Friday.

The Official Gazette on Saturday said that 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 would be converted to lira at the official exchange rate on Jan. 2 and raised in line with consumer price inflation rates.

The lira stood at 3.8 against the US dollar at the start of the year, but has since slumped to 6.18. The currency was at 4.5 against the euro at the start of the year and is now at 7.08.

Meanwhile, Turkish Minister of Finance and Treasury Berat Albayrak said there would be no compromise in budget discipline in his program to combat surging inflation due to be announced next week, the state-run Anadolu news agency reported on Sunday.

Earlier last week, data showed Turkey’s inflation last month soared to a 15-year high of nearly 25 percent, with prices jumping 6.3 percent from a month earlier.

Albayrak said he would announce a program as part of the government’s “full-fledged” battle against rising consumer prices.

“There is no compromise in budget discipline, the rebalancing period in the economy has started. A strong program to combat inflation will be announced,” Albayrak was quoted as telling members of the ruling Justice and Development Party on Sunday.

In an attempt to rein in the plunging currency, the Turkish central bank last month delivered a massive 6.25 percentage point rate hike.

The currency has been underpinned by this and by hopes that ties with the US might improve.

The sell-off has pushed up prices of everything from food to fuel and eroded confidence in what was once a high-flying emerging market.

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