Turkish markets last week witnessed high fluctuations in exchange rates, interest rates and the stock market, particularly after the central bank limited the Turkish lira supply to overseas markets to thwart any depreciation in the currency in overseas swap markets. While markets returned to normal Thursday, further normalization is expected after the Sunday polls. Turkey will quickly enter a normalization process following the March 31 municipal elections, Treasury and Finance Minister Berat Albayrak said Thursday.
There will be no election issues in Turkey for four-and-a-half years following the Sunday polls, and the country will swiftly proceed into a new era, Albayrak stressed in a televised interview.
"After the elections, Turkey will enter a reform period, where there will be positive results of the economic rebalancing period," he noted. These economic reforms will be announced in the second week of April, he added.
In the first week following the March 31 municipal elections, the government is poised to launch a comprehensive new reform package geared toward improving the country's economic outlook.
The economy administration, led by Albayrak, has been working on a reform package for some time now. It includes significant changes in the tax regime, financial structure, agricultural policies and capital markets. The new economic road map that the new reform package will lay out stipulates a fairer and more inclusive tax regime, reducing indirect taxes.
The transition to a registered economy will be expedited with the measures included in the new road map, while the financial structure will be redesigned. With the goal of expanding capital markets, the reforms will include steps to establish a new fund, regulations to boost Istanbul's ranking as an international finance center and diversification of financial derivatives. Moreover, plans to reduce unemployment and ensure a fairer distribution of income will be implemented. Production plans in agriculture will be included in the program, while the incentive system will be redesigned.
Moreover, Albayrak is also scheduled to attend the International Monetary Fund (IMF) and World Bank meetings on April 12-14 in Washington. During the meetings, he will shed light on the new road map for the Turkish economy and meet investors and finance circles. The minister will later meet American businesspeople as part of the 37th Joint Annual Conference of the American-Turkish Council (ATC) and the Turkish-American Business Council (TAİK). The conference will take place on April 14-16.
During the interview, Albayrak also highlighted that Turkey will take the necessary steps to strengthen its financial ecosystem. "In the coming period, Turkey's foreign trade will be balanced and its fragility will be eliminated," he added. Albayrak underscored that monetary and fiscal policies will be normalized in coordination. Turkey's potential is in its current position in world trade. The country has the capacity for meeting $250 billion to $300 billion in exports, he noted.
Turkey's central bank is also taking steps independently and will continue to take steps in its own way, Albayrak stressed. "In recent days, there have been currency fluctuations based on speculative information on Turkey," he said, referring to last Friday's movements. Since last Friday, the Turkish lira has seen high rates of volatility in the markets, which were triggered by investment bank reports that recommended shorting the currency against the lira in the period following the March 31 elections. As rumors concerning expectations for the lira spread among investors, the tendency to short the currency against the U.S. dollar grew within hours and it tumbled nearly 5.5 percent against the greenback. While the Turkish lira rose to 5.33 per dollar on Wednesday, it was trading at 5.64 around 5 p.m. on Friday.
To support the Turkish lira, the Central Bank of the Republic of Turkey (CBRT) suspended one-week repo auctions through which the central bank funded the Turkish market at 24 percent as a measure against the volatility of the Turkish lira during the trading session on that day.
The central bank continued to implement supportive measures and decided to squeeze the over the counter lira trade by increasing the swap sale limit to 20 percent from 10 percent for transactions that have not matured. The limit was later increased to 30 percent yesterday. The central bank uses the Turkish lira currency swap market to increase efficiency in forex (foreign exchange) liquidity management.
