ISTANBUL (Reuters) – Turkish Finance Minister Nureddin Nebati has briefed the country’s banking association, banking watchdog BDDK and directors of state banks about the government’s new low-rate business model, according to the association, after the pound fell to record levels.
The lira fell above 17 per US dollar on Friday after fears of an inflationary spiral mounted, prompted by President Tayyip Erdogan’s policies on soaring prices.
At its lowest, the currency had lost some 55% of its value this year, 37% of which was in the past 30 days.
In a statement, the banking association said the purpose of the meeting was to discuss “healthy and consistent growth.”
He added that developments in the banking sector, as well as the national and global economy, had been assessed.
“Our banks will continue to use their resources to meet the financial needs of households and the real economy, under the free market mechanism that works with its rules,” he said.
Despite criticism from opposition economists and lawmakers, Erdogan insisted that monetary easing boost credit, exports and growth ahead of the 2023 election, causing the lira to lose 55% of its value against the lira. dollar this year, of which nearly 40% in the last month alone.
The sharp depreciation has caused the sterling value of foreign currency loans to skyrocket, putting pressure on banks’ capital adequacy ratios (CARs), which are measured in local currency.
Turkish authorities are working on possible relief measures for banks caught between the currency crash and capital requirements, including a possible capital injection for state banks.
Earlier on Saturday, Turkey’s largest business group, Tusiad, called on the government to abandon the current monetary policy, calling for a return to “the rules of economics”.
The Tusiad group of companies said they had warned the government of the negative impacts of the low interest rate policy and that the economic hardship was hurting businesses and citizens.
“Due to the instability we have experienced in recent times, it has become clear that the objectives of this economic program which is being attempted will not be achieved,” he said in a statement.
He said that “an environment of mistrust and instability has been created” and that the business model risks causing “much bigger” problems in the future.
âEven exports, which are expected to benefit the most, have been affected in this environment,â he said.
Under pressure from Erdogan, the central bank has cut rates by 500 basis points since September. Erdogan said the model will boost exports, jobs and investment, while achieving high growth. Economists called his experience “reckless.”
Devlet Bahceli, an ally of Erdogan and leader of the nationalist MHP party, rejected Tusiad’s “problematic” statement and said the new economic policy would succeed despite a “siege” on the economy.
But Kemal Kilicdaroglu, leader of the main opposition Republican People’s Party, reiterated a call for an immediate election and Meral Aksener, chair of the opposition Iyi party, said on Friday that Erdogan should step down.
âYou are not afraid of God, we understand, but at least you are ashamed in front of people,â she wrote on Twitter. – Reuters