Turkish central bank needs to make announcement on lira, columnist says

Turkey’s central bank should explain why the lira’s value appears to have been fixed for the past two months, said Şeref Oğuz, a columnist and head of the editorial board of Dünya newspaper.

The lira has been trading almost unchanged at 6.85 per dollar, but Turkey has not announced that it is switching to a fixed exchange rate system from a free-floating currency regime, Oğuz said in an article for Dünya, Turkey’s main financial daily, on Wednesday.

“It may be useful to have a stable currency but what will be the cost of this? How many more months can it be held at this level? What will happen when it passes this fixed barrier?" Oğuz asked.

Turkey’s central bank has spent tens of billions of dollars of its foreign exchange reserves in support of the lira this year. State-run banks have also shorted the dollar to help stabilise the currency after it fell to a record low of 7.269 per dollar in early May. The central bank had defended the lira at 7 per dollar for several weeks prior to the all-time low.

“We also want currency stability,” Oğuz said. “If they explain to us the logic of having a free-floating currency that looks fixed, then we will support this and the economic stability it produces.”

The lira traded at 6.849 per dollar on Wednesday.

Oğuz questioned the reasons why the exchange rate had stabilised when the value of the lira needed to account for the country’s monthly current account deficit and its annual foreign currency debt obligations of $240 billion. Turkey is still three years away from scheduled presidential and parliamentary elections, he said.

“If there was work on a new three-year economic programme to take us through to 2023, then I’d understand, as I would if we were going to elections,” he said.