Turkey will take steps to eradicate a dual exchange rate that’s emerged in recent months, the finance minister said, suggesting the central bank’s regulations might have contributed to the spread between the official and parallel markets.
(Bloomberg) — Turkey will take steps to eradicate a dual exchange rate that’s emerged in recent months, the finance minister said, suggesting the central bank’s regulations might have contributed to the spread between the official and parallel markets.
As restrictions on local banks intensified in the weeks before this month’s election, a dual exchange rate has become more entrenched in the Grand Bazaar in Istanbul, an ancient hub for traders where the lira is available at a weaker level to the dollar than in the interbank market.
Read more: Turks Skip Banks, Head to Ancient Bazaar to Dump Their Liras
“Even if there’s been a dual pricing formed between our central bank rates and the free markets rate, this is a reflection of the extraordinary measures taken under an extraordinary situation and quickly and continuously changing decisions taken by our central bank” Treasury and Finance Minister Nureddin Nebati said in an interview with NTV TV on Friday.
Mounting expectations for the lira’s depreciation after the May 14 elections have already prompted authorities to take exceptional measures in defense of the currency. The central bank last month tweaked rules for gold trading, a move that supported the lira’s value in the bazaar and briefly helped narrow the gap with the official interbank rate.
Nebati’s comments appeared to contradict the view of central bank Governor Sahap Kavcioglu, who just this week denied that Turkey even had a dual exchange rate.
The finance minister said, however, that authorities will eliminate the spread in the rates by means of “new regulations” and with the “breaking of expectations” for a devaluation after the ballot.
Nebati also repeated that Turkey won’t raise interest rates after the elections and said speculation that the lira’s exchange rate could be much higher after the vote “does not reflect reality.”
“All players in markets have internalized low interest rates,” he said. “A different government does not mean the return of orthodox policies.”
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