Turkish lira dips, minister sees more forex converted to lira

Sources also cited Finance Minister Nureddin Nebati as saying he expected inflation to rise to about 40 per cent in the months ahead, lower than most estimates, and that no interest rate hikes were planned by the central bank.

At 0542 GMT, the lira traded at 13.49, weakening 0.15pc from Friday’s close of 13.47. It tumbled 44pc last year after the central bank slashed its policy by 500 basis points to 14pc since September, but has steadied this month.

Nebati met economists on Saturday and gave a presentation on Turkey’s economic model which he said aimed to solve the current account deficit problem, overcome the middle-income trap and lift Turkey up the global value chain.

In a statement, his ministry also cited Nebati as saying that project banking would be accelerated and that value-added tax would be simplified.

Turkey’s parliament last week approved a law under which lira deposits converted from forex under a scheme to support the currency will be exempt from corporate income tax on gains resulting from the conversion.

Companies have some $90 billion worth of foreign currency bank deposits, central bank data shows.

According to participants at Saturday’s meeting, Nebati said that lira deposits in the scheme had reached 184bn lira ($13.7bn) by Jan 21, while forex conversions to lira as a result of the corporate tax move could reach as much as $20bn based on Treasury assessments.

The deposit scheme, announced by President Tayyip Erdogan in December, compensates depositors for any loss in the value of the lira incurred during the duration of the deposit.

According to four participants, Nebati told the meeting that the most important priority would be lowering inflation, which surged to 36pc in December.

Economists see inflation reaching 50pc in the first half of the year. However, Nebati was cited as saying he did not expect such a rise, but that inflation could rise to around 40pc in the coming three months, before subsequently falling clearly, potentially to below 30pc by year end.

Nebati reiterated that inflation would fall to single digits by the time of elections set for mid-2023.

Participants also cited him as saying that there would be no turning back from the central bank’s current monetary policy and that nobody should expect rate hikes, adding that the policy rate’s importance had lessened.

Article source: https://www.suchtv.pk/business/item/111035-turkish-lira-dips-minister-sees-more-forex-converted-to-lira.html