Turkey has an action plan to ease market problems; firms lyre with a record low level

ISTANBUL (Reuters) – Turkey has developed an economic action plan and will begin implementing it on Monday morning to ease investor concerns, Finance Minister Berat Albayrak said on Sunday after the lira plunged into a new record level at the beginning of the Asia-Pacific trade.

Turkish President Tayyip Erdogan addresses entrepreneurs in Trabzon, Turkey, on August 12, 2018. Murat Kula / Presidential Palace / handout through REUTERS

In an interview with the Hurriyet newspaper published on the Internet, Albayrak described the weakness of the lyre as an "attack", repeating President Tayyip Erdogan, who is his father-in-law, and said that the plan of action is ready.

"From Monday morning, our institutions will take the necessary steps and share announcements with the market," Albayrak said, without specifying details about what the steps will be.

Albayrak also said that the plan was prepared for banks and the real sector of the economy, including small and medium-sized businesses, which are most susceptible to fluctuations in foreign currency. "We will take the necessary steps with our banks and bank controller in the shortest possible time," he said.

He also rejected any suggestions that Turkey could intervene in dollar bank accounts, saying that there was no way to withdraw or convert these deposits into a lyre.

Lira TRYTOM = D3 fell to a record low of $ 7.24 against the dollar during the Asia-Pacific trade, where markets opened on Monday morning. He suffered losses after the comments of Albayrak and stood at 6,8603 at 2136 GMT on Sunday.

The currency has lost more than 45 percent of its value this year, mainly due to concern over Erdogan's impact on the economy, his repeated calls for lower interest rates in the face of high inflation and deteriorating ties with the United States.

On Friday, the lyre fell by as much as 18 percent, which is the biggest daily drop since 2001.

Earlier, Erdogan opposed high interest rates, stating that they are an instrument of exploitation and that Turkey is not going to fall into this trap.

In an interview with Hurriyet, Albayrak said that fiscal policy is important for supporting and strengthening the monetary policy of the central bank. "We will enter a strong period in terms of fiscal policy," he said.

Bank Observer of Turkey BBDK in its statement stated that it limits the transactions of currency swaps of banks.

STORM IN TEA

Erdogan, who called himself the "enemy of interest rates," wants a cheap loan from banks to stimulate growth, but investors are afraid of overheating the economy and may be set for a hard landing.

Turkish Finance Minister and Finance Minister Berat Albayrak during the presentation state their economic policy in Istanbul, Turkey, on August 10, 2018. REUTERS / Murad Sezer

His comments on interest rates – and his recent appointment as his son-in-law as finance minister – reinforced the notion that the central bank is not independent.

On Sunday, speaking to supporters in Trabzon on the Black Sea coast, Erdogan rejected proposals that Turkey was in a financial crisis similar to those seen in Asia two decades ago.

According to him, the free fall of the lira was the result of a conspiracy and does not reflect the economic foundations of Turkey. "What is the reason for all this storm in the tea cup? There are no economic reasons … This is called conducting an operation against Turkey, "he said.

The central bank raised interest rates to support the lira in the emergency movement in May, but at the last meeting it did not tighten monetary policy.

Erdogan repeated his call to the Turks to sell dollars and buy lira in order to strengthen the currency, and business owners did not have enough dollars.

"I specifically address our producers: do not rush to buy dollars from banks. Do not take a position: "We are bankrupt, we are finished, we must guarantee ourselves." If you do this, it will be wrong. You should know that supporting this nation is … also the debt of producers. "

Turkish President Tayyip Erdogan appeals to members of his ruling AK party in Rize, Turkey on August 11, 2018. Murat Kula / Presidential Palace / handout through REUTERS

DEADLINE

The tournament with the United States even more weighed the lira.

The two NATO allies had disagreements over a wide range of issues: scattered interests in Syria, Ankara's desire to buy Russian defense systems, and more recently the case of Andrew Branson, evangelical pastor in court in Turkey.

After Branson was in prison for almost 20 months, the court in July ordered him to move to house arrest. Since then, US President Donald Trump and Vice President Mike Pence have called for his release, while Ankara states that the decision is in court.

Washington responded by authorizing two Turkish ministers, and Trump on Friday announced that the United States was doubling the tariffs on imports of steel and aluminum from Turkey, saying that the relationship with Ankara was "not good at this time."

Last week, the Turkish delegation went to Washington and met with its American counterparts, but there was no breakthrough.

On Sunday, Erdogan told the details of the talks between the two countries over the pastor, saying that the United States gave Turkey until last Wednesday to hand it over. "They threatened our ministers with sanctions if we did not do it," he said.

The White House spokesman said that they had not set a deadline for Branson, adding that he had been waiting at home long ago. According to the official, diplomacy on this issue continues.

Reporting by Humeyra Pamuk; Additional reporting by Ezgi Erkoyne and Jeff Mason at Bridgewater, New Jersey; Editing by David Stump and Cynthia Osterman

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