Turkish central bank provides support for forex conversions from abroad

Turkish central bank provides support for forex conversions from abroad
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The Central Bank of Turkey revealed on Thursday a new scheme to provide support for foreign exchange conversions coming from abroad.

As part of the “liraization” strategy of the Turkish government to combat the depreciation of the lira and the high inflation rate, the Central Bank unveiled a 2% conversion discount for firms converting foreign currency from abroad. The Central Bank believes the support will incentivize the conversion of foreign exchange into Turkish liras.

According to Reuters, the Bank also stipulates that the firms must “pledge not to buy foreign currency for a period determined by the bank and deposit the remaining amount to conversion accounts as part of a scheme to protect lira deposits against forex depreciation.”

Analysts have criticized the move on the basis that the “the practice could create a separate FX conversion rate to the trading rate in the free market.” Central Bank Governor Sahap Kavcioglu finds the concern to be unfounded, and said on Thursday, “We don't have dual foreign exchange rate, we are just encouraging foreign currency resources from abroad...I do not agree with this interpretation of the practice.”

RTT News reports that Governor Kavcioglu will be presenting on the first quarterly inflation report of this year “that will reveal the price projections and give hints on the interest rate path.”