There was no intervention and Turkish banks or public institutions did not sell any US dollars on the night of December 20, when a new economic model was announced and the lira recorded a massive rebound, the country’s treasury and finance minister said Monday.
“There was no intervention that evening, neither from public banks nor from anyone else,” Nureddin Nebati said in a TV interview with broadcaster A Haber.
“Individuals ran that night to sell their dollars, thanks to the trust created by our President Recep Tayyip Erdoğan,” Nebati noted. “Dec. 20 will now be considered one of Turkey’s most important days.
The lira jumped around 50% last week after the announcement of a protection plan for lira deposits. Some media outlets claimed the increase was also backed by billions of dollars in state-backed market interventions. Nebati dismissed the claims.
Erdoğan last week unveiled a program allowing savers to convert foreign currency (forex) deposits into liras, under which the Treasury and the Central Bank of the Republic of Turkey (CBRT) would refund losses on lira deposits converted into liras. foreign currencies, triggering the biggest rally.
According to a CBRT document sent to banks on Monday, it will support these forex-protected lira deposit accounts by not applying reserve requirement ratios on them. It will impose a higher commission on banks when the transfer from forex accounts to lira accounts does not exceed a certain level.
Last week’s rally took the Turkish currency back to mid-November levels. Last Monday, it fell to an all-time low of 18.4 lira per US dollar.
Erdoğan said on Friday that Turks have confidence in the local currency and Nebati said deposits increased by TL 38 billion after the anti-dollarization plan was announced.
Erdoğan said the government had burst a bubble in the foreign exchange market by taking steps to protect lira deposits from volatility.
Nebati also refuted reports that the new economic model would place a significant burden on the Treasury, saying the first balance sheets would be published in three months.
He also reiterated Turkey’s determination to stick to free market economic principles.
“We are 100% committed to the free market economy. The exchange rate regime is something we can never let go of,” he noted.
Turkey will end 2021 with double-digit gross domestic product (GDP) growth, Nebati noted.
The economy grew 7.4% year-on-year in the third quarter, following a massive 22% expansion in the second quarter, rebounding from a sharp slowdown a year earlier due to COVID-related restrictions. 19.
The main priority going forward is inflation, Nebati said, underscoring determination and expectations to see prices come down significantly in 2022.
Annual inflation accelerated to 21.31% last month, the highest level since November 2018, with basic prices such as food and gasoline prices surging recently.
According to the central bank, which has lowered its key rate by 500 basis points to 14% since September, inflationary pressures are temporary and necessary to accelerate economic growth and balance the current account.