- Central bank wants to ease pressure on lira ahead of elections
- Banks to have dual FX rate for FX transactions with firms
According to Bloomberg article published on March 20, 2023, Türkiye’s central bank asked commercial lenders last week to use a dual foreign-exchange rate for transactions with companies, the latest step in its bid to ease pressure on the lira.
The monetary authority told banks that companies with a foreign-exchange surplus must pay a premium to buy more dollars, according to people with direct knowledge of the matter.
Lenders were asked to raise the minimum USDTRY rate at which transactions with those companies and individual investors can take place to 19.2 from 19.15 previously, the people said, asking not to be identified, citing sensitivity of the matter. The lira closed last week at 19.0138 to the dollar.
The Turkish central bank declined to comment.
Authorities have gradually widened the spread between the exchange rate used in interbank transactions and the levels offered by lenders to their retail customers. Corporate clients with a short net FX position will still be able to buy dollars at interbank rates, the people said. Purchases of $2.5 million or more need to get a clearance from the central bank, they said.
Keeping the lira steady has become a cornerstone of Turkish authorities’ efforts to contain inflation, which breached 80% late last year. Authorities want currency volatility in check going into elections in May.
But a more stable lira during a period of rampant inflation is taking its toll on the country’s foreign trade as rising costs are eroding Turkish exporters’ competitiveness. Preliminary data show Turkish exports dropped 6.4% last month from a year earlier, the first annual decline since November 2020.
