Central bank acts over crisis in Turkey currency

TURKEY’S CENTRAL bank has announced a series of measures to free up cash for banks as the country grapples with a currency crisis sparked by concerns over President Recep Tayyip Erdogan’s economic policies and a dispute with the United States.

The Turkish lira has nosedived over the past week and tumbled another seven per cent on Monday as the central bank’s measures failed to restore investor confidence.

The currency hit a record low of 7.23 per dollar late on Sunday after Mr Erdogan, in a series of speeches over the week, showed no sign of backing down in the stand-off against America, a Nato ally.

Mr Erdogan said: “Turkey is faced with an economic siege. We are taking the necessary steps against these attacks and will continue to do so.”

The president ruled out the possibility of higher interest rates, which economists said are needed to stabilise the currency. He also threatened to seek new alliances and partners - a veiled hint at closer ties with Russia and warned of drastic measures if businesses withdraw foreign currency from banks.

Simon Derrick, chief currency strategist at BNY Mellon, said that in the absence of a decisive rate hike, “it is hard to look at these announcements as being anything more than temporary calming measures, rather than solutions to the problems at hand”.

The lira recovered some of its losses after Berat Albayrak, the country’s finance chief – and Mr Erdogan’s son-in-law - said the government had read–ed an “action plan” to ease market concerns. He also said the government had no plans to seize foreign currency deposits or convert deposits to the Turkish lira.

The central bank said it had taken a series of steps to “provide all the liquidity the banks need”.

The moves are meant to grease the financial system, ease any worries about trouble at the banks and keep them providing loans to people and businesses.