Photo: Anadolu Agency (AA)
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Following the Presidential Cabinet meeting in Ankara yesterday (December 20), President and ruling Justice and Development Party (AKP) Chair Recep Tayyip Erdoğan addressed the public and unveiled a series of measures against the increasing exchange rates.
Shortly after Erdoğan shared the measures with the public, the exchange rate of the US Dollar (USD), which hit 18.30 Turkish Lira (TRY) during the day yesterday, dropped to 14.80 TRY and that of Euro, which saw 20.72 TRY during the day, fell to 16.68 TRY.
A day later, today (December 21), the drop in exchange rate has hit 35 percent. Earlier in the day, the exchange rate of the USD dropped to 12 TRY while that of Euro dropped from 20.72 TRY to 13.50 TRY. The price of gram gold also decreased from 1,055 TRY to 648 TRY.
It is estimated that after President Erdoğan addressed the public, over 1 billion US Dollars has been exchanged to Turkish Lira, according to Banks Association of Turkey Chair and Ziraat Bank Director General Alpaslan Çakar, who spoke to Habertürk TV yesterday.
'To soothe the worries over exchange rates'
Addressing the public after the meeting yesterday evening, Erdoğan said that the government was "presenting a new financial alternative for citizens' savings to soothe worries over exchange rates."
As reported by the state-run Anadolu Agency (AA), Erdoğan stated that "no citizen would have to move their savings from the Turkish Lira to foreign currencies," announcing that "for exporting companies that find it difficult to present prices due to fluctuations in foreign exchange rates, they will be given an exchange rate in the future through the Central Bank."
He also said that stoppage (deductions) on companies' dividend payments would also be lowered to 10 percent.
The state subsidy rate on the personal pension system would be raised from 25 percent to 30 percent in order to boost its appeal, he said.
Erdoğan also said that there would be a new instrument to help people who might invest in foreign exchange get the same results while sticking to the Turkish Lira. He briefly explained: "If the returns made by our people on Turkish Lira at the bank is higher than the increase in the exchange rate, they will receive these returns, but if the returns given by the exchange rate is higher, the margin will be directly paid to our citizens."
"Investors will be encouraged to move towards Turkish Lira-based assets by issuance of government bills that are indexed to public economic enterprise revenues that are transferred to the budget," he added.
The new measures came in the wake of rising prices and soaring exchange rates as the government pursues what Erdoğan calls the "new economic model," which stresses opposition to high interest.
'From mattress to markets'
On what he calls the "under-the mattress savings" of people who withdraw their assets from the banks and keep them at home, Erdoğan also stated that these would come back into the economy.
"There are five tons of gold with a total worth of 280 billion dollars under the mattress. New instruments will be developed with market participants in order to incorporate this into the economy," he reiterated.
Erdogan said that high inflation in Turkey would decline in a few months thanks to the Central Bank's interest rate cuts – in line with his oft-repeated mantra: "Interest rates are the reason, inflation is the result."
CLICK - Turkish lira hits new record low after Erdoğan reiterates his inflation-interest rate theory
"Turkey does not have any intention, nor the need, to step back from the free market economy or foreign exchange regime," he said, hitting back at baseless rumors the government has condemned.
"This country will no longer be a haven for those who gain more money with high interest rates, nor a haven for imports," he added.
Erdoğan stressed that he would not allow any steps that would lead to lower investment, employment, production, or exports.
"Turkey will no longer be a country that will mortgage its economy and politics to the outside through IMF programs," he said.
Erdoğan aslso called for all investors who have money and access to finance to invest and produce in Turkey, briefly saying: "Now is exactly the time to move if Turkey is to climb the economic ladder." (HA/SD)
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