Jun 07 2018

Turkey faces more attacks to force rates higher – Erdoğan adviser

Turkey is ready for more attacks by Western market participants as they attempt to force the country to raise interest rates and strengthen the currency, said Cemil Ertem, senior economic adviser to President Recep Tayyip Erdoğan.

The attacks are pre-planned and will occur at the end of each week, much like a report by credit ratings agency Fitch on the country’s banks last Friday, when analysts placed the companies on “ratings watch negative” for a possible downgrade, Ertem said in a regular column for the Milliyet newspaper on Thursday.

Certain circles are attempting to force Turkey into an interest rate-exchange rate trap and to instigate a financial crisis, and the government is prepared for this, Ertem said.

Turkey’s lira hit a record low of 4.92 per dollar last month after Erdoğan said he would take a bigger role in monetary policy and lower interest rates after elections on June 24. The central bank, under political pressure to keep rates low, was then forced to intervene and raise rates by 300 basis points to 16.5 percent at an emergency meeting. Meanwhile, banks are restructuring billions of dollars in lending after the lira’s decline made loans in foreign currency more difficult to repay.

Contrary to the opinions of ratings agencies and “manipulative” reports of some other financial players, Turkey’s banks, which are highly capitalized with impressive profitability and few non-performing loans, are in a very strong position compared with their peers in Europe, he said.

Nevertheless, Western financial circles are attacking banks in Turkey because they are selling stakes to financial companies in Asia and the Middle East, Ertem said. The share prices of the banks, which are undervalued, are expected to surge in the coming weeks, he said.