President of Turkey, Recep Tayyip Erdogan speaks during the Turkey-Africa Business and Economy Forum at Lutfi Kirdar International Convention Center in Istanbul, Turkey, on October 10, 2018. Photo: AA
ERBIL, Kurdistan Region — As a part of ongoing efforts to preserve Turkey's currency, foreign loans must be converted into lira at the exchange rate determined by the central bank.
By decree, President Recep Tayyip Erdogan determined that the domestic daily lira rate should be used by businesses which are seeking to restructure loans, Turkey's Official Gazette published on Thursday.
Ankara's private-sector debt continues to grow and Erdogan's decision forces investors to use the central bank exchange rate instead of the foreign exchange (FX) rate used by most of the global market.
The move was part of Erdogan's 'Investment Program Preparations for 2019-2021 Period' that he announced on Thursday.
"Turkey to implement new economic program to preserve macroeconomic stability, raise production, welfare," said Erdogan, according to state-run Anadolu Agency.
The president wants to ward off inflation. Erdogan has taken
drastic measures to try to preserve Turkey's currency. Pundits argue binding the exchange rate to the central bank could damage banks and discourage international investors who seek stability.
The Turkish lira has plummeted over the past year compared to the US dollar. At the start of 2018, $1 was worth about 3.8 lira. In August, nearly 7 lira was worth $1. It has rebounded slightly since September — as of Thursday about 6 lira buys $1.
Turkey's economic woes follow diplomatic spats with the United States, a refugee influx, the protracted Syrian conflict, and a trade/tariff war initiated by Washington.
Turkey is the Kurdistan Region's largest trading partner. It is Iraq's second-largest. Plans have been announced to ease border trade at the crowded Ibrahim Khalil crossing — the only official Turkey-Iraq crossing that links Baghdad to Europe.