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Turkish central bank to provide support to firms that convert forex from abroad
Published Jan 25, 2023 11:41PM ET
Updated Jan 26, 2023 10:22AM ET
© Reuters. FILE PHOTO: Turkey's Central Bank headquarters is seen in Ankara, Turkey in this January 24, 2014 file photo. REUTERS/Umit Bektas//File Photo
ISTANBUL (Reuters) -Turkey's central bank said on Thursday it would provide foreign exchange conversion support to companies that bring in foreign currency from abroad, including exporters and tourism firms.
Firms can benefit from a 2% discount as conversion support when converting foreign currency from abroad if they pledge not to buy foreign currency for a period determined by the bank and deposit the remaining amount to conversion accounts as part of a scheme to protect lira deposits against forex depreciation, according to the central bank.
Analysts have voiced concern that the practice could create a separate FX conversion rate to the trading rate in the free market.
But Central Bank Governor Sahap Kavcioglu dismissed this criticism when asked about it at a presentation on Thursday.
"We don't have dual foreign exchange rate, we are just encouraging foreign currency resources from abroad...I do not agree with this interpretation of the practice," he said.
"There is no different foreign exchange rate application in Turkey, the FX rates at the banks are the same to the exporters," Kavcioglu added.
As part of its so-called liraization strategy, the central bank has taken several measures to revive interest in currency, after years of depreciation and high and volatile inflation sent Turks seeking safer places for their savings.
These steps, as well as lira stability in the last several months thanks partly to indirect forex sales to the market, helped cut share of foreign currencies to around 46% of total bank deposits compared to some 65% a year ago.
The latest steps are expected to further ensure a stable course in foreign exchange rates.
Last week, the central bank set the remuneration rate on foreign currency free reserve accounts at 4.5%, establishing a remuneration rate for lenders who hold forex free reserve accounts in the country.
Separately, the central bank removed a 12% maximum interest rate limit on lira deposits converted from foreign currencies, in a move that is aimed at attracting more fx holders to turn to lira with higher rates.
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