Tur­key sets rules on prop­erty sales, rent

Global Times - - World -

Turk­ish Pres­i­dent Tayyip Er­do­gan ruled that prop­erty sales and rental agree­ments must be made in lira, putting an end to such deals in for­eign cur­ren­cies, in a fresh step to sup­port the ail­ing lo­cal cur­rency.

The de­ci­sion, pub­lished in Tur­key’s Of­fi­cial Gazette on Thurs­day, said that sales con­tracts and rental agree­ments in for­eign cur­rency must be con­verted into lira within 30 days.

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

The lira has lost some 40 per­cent of its value against the dol­lar this year over con­cerns about Er­do­gan’s in­flu­ence on mon­e­tary pol­icy and a diplo­matic spat be­tween Tur­key and the US.

It stood at 6.37 against the dol­lar at 6:09 GMT, slightly weaker than Wed­nes­day’s close.

Er­do­gan, who has de­clared him­self an en­emy of high in­ter­est rates, has cast the lira cri­sis as an “eco­nomic war” tar­get­ing Tur­key and has re­peat­edly urged Turks to sell their dol­lar sav­ings to shore up the lira.

Tur­key’s cen­tral bank meets on Thurs­day and is ex­pected to raise in­ter­est rates to sup­port the lira. Ac­cord­ing to a Reuters poll, the bench­mark rate is ex­pected to be hiked by 225-725 ba­sis points.

The de­ci­sion on trans­ac­tions also in­cluded con­tracts for busi­ness and ser­vices. The con­tracts can­not be agreed in for­eign cur­rency or in­dexed to a for­eign cur­rency, ac­cord­ing to the Of­fi­cial Gazette.

It was the lat­est in a series of steps Tur­key has taken since Au­gust to choke dol­lar de­mand. The cen­tral bank has launched a forex swap mar­ket for banks, while the bank­ing watch­dog limited de­riv­a­tive trans­ac­tions.

It has also re­quired Turk­ish ex­porters to con­vert the bulk of their over­seas rev­enue into lira.

Against ex­pec­ta­tions, the cen­tral bank did not raise rates at its last meet­ing in July. Since then, the lira has lost some 25 per­cent of its value and data last week showed an­nual in­fla­tion surged to 17.9 per­cent in Au­gust.

In­vestors ex­pect the cen­tral bank to de­liver a rate hike in Thurs­day’s meet­ing but an­a­lyst fore­casts for the scale of the in­crease vary widely as the bank bal­ances con­cerns over lira weak­ness with wor­ries about an eco­nomic slow­down.

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