Turkey will act at right time on lira, minister says

Turkish institutions will act at the appropriate time and in the right proportions to stem a slide in the lira, taking into account the impact on the real economy, Economy Minister Nihat Zeybekçi said.

The government has total confidence in these institutions, Zeybekçi said, according to Hurriyet newspaper.

The country does not deserve to be subject to such sales of its currency and bonds because the economy, exports, employment and industry have been outperforming, Zeybekçi said, adding that it is a global leader in providing incentives for investment.

Turkey’s lira slumped to a record low of 4.92 per dollar on Wednesday, falling about 5 percent, as investors and retail clients sold the currency on concern about economic instability in the country. Ratings agencies and the IMF have warned that the economy is overheating after the government stimulated growth with a range of tax cuts, loan guarantees and investment incentives.

The government will continue to respect the rules of the free market and encourage economic growth, without compromising fiscal discipline and the fight against inflation, Zeybekçi said.

Investors are expecting the central bank to intervene and increase interest rates to stem the lira’s decline, but are concerned that President Recep Tayyip Erdoğan, who claims higher interest rates stoke inflation, is interfering in monetary policy. Erdoğan said last week he would take more control of such decision-making following snap presidential and parliamentary elections on June 24.

Zeybekçi, hired by Erdoğan as minister in 2013, is a former mayor and close friend of the president. Deputy Prime Minister Mehmet Şimşek, a former Merrill Lynch economist, has been assigned official overall responsibility for economic affairs, though his relations with Erdoğan have reportedly deteriorated in recent months.