Turkey to provide 2% forex conversion support to firms

Reuters

Turkey’s central bank said on Thursday it will provide two percent foreign exchange conversion support to companies that bring forex into the country from abroad, sell it to the central bank and pledge not to buy forex for a period determined by the bank.

After selling 40 percent of the forex they bring into the country to the central bank under pre-existing rules, companies will be allowed to deposit the remaining amount into conversion accounts under a scheme that protects lira deposits against forex depreciation, the bank said.

It said companies who pledge not to buy more forex than they have sold to the central bank for a period determined by the bank will be given support equal to two percent of the amount they converted and deposit in such accounts.

The move aims to support the bank’s liraisation targets in commercial activities, the bank said, adding that lenders will determine whether the forex sold to the central bank and deposited in lira protected accounts is obtained from abroad.  

Last week, Turkey’s central bank held interest rates at nine percent for a second straight month as analysts said it could return to easing in the run-up to May elections given inflation is expected to drift lower from 64 percent in December 2022.

President Tayyip Erdogan faces tight elections in four months in which the cost-of-living crisis is a top concern. He could soon urge more rate cuts as part of his unorthodox stance that policy easing also lowers prices, analysts told Reuters.