As Turkey’s president revealed a new financial mechanism to shore up the local currency, the Turkish lira made an overnight comeback on Monday against international currencies, including the US Dollar, the Euro, and the British Pound Sterling.
The fresh measures come as the government pursues its “new economic model,” which emphasizes opposition to high interest in the wake of rising prices and exchange rates. Turkish President Recep Tayyip Erdogan said the new instrument would allow potential investors in foreign currencies to get the same results while sticking to the lira.
According to the Turkish government, the surge in exchange rates ignored Turkey’s strong economic fundamentals while hoarders and global factors have triggered the high prices observed. The Turkish president further expressed that the benefits of this new approach will become clearer in the next three to six months.
Meanwhile, Erdogan explained that investors will be encouraged to move towards Turkish lira-based assets by the issuance of government bills indexed to public economic enterprise revenues that are later transferred to the budget.
Also referring to what he called “under-the mattress savings” of people who withdraw their assets from Turkish banks and keep them at home, Erdogan stated that these would come back into the economy through the development of new economic instruments in order to help people, who might invest in foreign exchange, obtain the same results while sticking to the Turkish lira.
Hitting back at baseless rumors the government has condemned, the Turkish president expressed that they do not have any intention to step back from the free market economy or foreign exchange regime. Erdoğan added: “This country will no longer be a haven for those who gain more money with high interest rates, nor a haven for imports.”
In addition, Erdogan stressed that he would not allow any steps that would lead to lower investment, employment, production, or exports, nor let Turkey mortgage its economy and politics to the outside through IMF programs. He called for all investors who have money and access to finance to invest and produce in Turkey.
On Tuesday morning, the US Dollar/Lira exchange rate dropped to 11.2248 as of 01.30 EST, recovering from a record low of 18.36, thus gaining almost 40 percent since Monday evening. Meanwhile, a similar drop was witnessed against the Euro and the British Pound Sterling.