Turkey’s central bank has requested commercial lenders to limit large dollar purchases on behalf of their corporate clients until Monday [2]. The move is aimed at supporting the lira, which has seen a significant decline in value against the dollar. The request came in the form of a letter sent to local lenders on Monday, warning against conducting forex transactions with foreign banks during “off hours” [1].
This is not the first time Turkey’s central bank has intervened to prevent the lira from further depreciation. The bank has previously tightened its oversight of the currency market, asking lenders to report large dollar purchases and limiting the amount of foreign currency that can be borrowed from abroad [4]. The government has also implemented regulations that have led to a reduction in corporate lending, with many banks struggling to lend due to the increased costs [6].
The lira has been under pressure due to various factors, including the government’s insistence on reducing the cost of borrowing despite annual inflation running at 20% [7]. The central bank has cut interest rates by 500 basis points to 9% during a four-month long easing cycle that ended in November, despite inflation being 17 times the official target [2].
In an effort to address credit availability, the central bank recently unveiled new measures, including higher reserve requirements and collateral for lenders [11]. However, these measures have been met with criticism from business groups, who argue that they create unfavorable conditions for borrowers [3].
In summary, Turkey’s central bank has requested commercial lenders to limit large dollar purchases to support the lira’s value. This request is part of a series of interventions aimed at preventing the lira’s further depreciation, including increased oversight of the currency market and regulations that have reduced corporate lending. These interventions come in the face of various challenges, including the government’s insistence on reducing the cost of borrowing despite high inflation and criticism from business groups regarding credit availability measures.