As elections approach and Turkish President he tries to protect her Turkish pound, Bank of Turkey is again resorting to various maneuvers under the leadership of Tayyip Erdogan to prevent the Turkish currency from falling further. The latest in this series was the decision to offer the country’s exporters a favorable exchange rate to convert their export earnings into Turkish currency. This exchange rate, which will have a bonus of 2%, will be subject to the condition that profits from this advantageous transaction are held for an as yet unspecified period of time in Turkish Lira. According to a related announcement published in the government’s official gazette, the mechanism will only apply to those exporters who “commit” not to buy hard currency for a period of time yet to be determined and expected to be announced shortly. the authorized body of the monetary policy of Turkey.

According to Bloomberg, there have previously been complaints from Turkish export companies that described the Turkish lira as “overpriced” and expressed concerns that their products risk losing competitiveness abroad. Some industry groups are even explicitly calling for a devaluation of the Turkish currency or the introduction of an alternative exchange rate, adding pressure to the government in the midst of election season. It should be noted that the Erdogan government has long placed an obligation on export companies to transfer to the central bank 40% of the revenue they receive in hard currency from their sales abroad, and receive Turkish lira in return. The new agreement gives them the opportunity to benefit from a better exchange rate if they keep the remaining 60% of their income in Turkish lira. In this case, they still take advantage of the so-called “protected” accounts. These are the accounts that the Erdogan government has promised to offset in the percentage they lose due to the exchange rate.

It offers the country’s exporting businesses a favorable exchange rate to convert their export earnings into Turkish currency.

As for, however, exporting companies that default on their obligations, they will henceforth be required to make payments to the central bank at a different exchange rate, to which the overnight credit rate will be added. While announcing the new unorthodox policy, the Bank of Turkey emphasized that the decision is part of its strategy to “lyricize” the economy, which means the government’s policy to encourage the use of the national currency, which is the cornerstone of efforts to support the currency. . At the same time, the central bank is considering a number of other measures aimed at preventing banks from selling Turkish currency derivatives to their customers in order to limit demand for dollars. Measures are currently being studied and the central bank is planning details that have yet to be decided, sources who spoke to Bloomberg on condition of anonymity said. The pound has fallen 1% against the dollar since the beginning of the year. However, over the past year, the Turkish currency has lost 30% of its value against the dollar, which was the worst performance among emerging market currencies.