Turkey Attempt To Boost Lira

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Last Friday, Turkey has reduced the tax levels on lira bank deposits in a fresh attempt to boost the weakened currency.

The withholding tax on lira savings of more than a year will be reduced from 10 perccent to zero, while the tax on deposits of under than a year will be reduced to three percent from the original 12 per cent.

The Official Gazette of the country revealed that the tax on foreign currency savings of a maximum of one year has risen from 15pecent  to 16 percent.

Last Thursday, the value of the currency plunged amidst the news that Erkan Kilimci, the deputy governor of the central bank, has stepped down from his position ahead of a vote over interest rates that is scheduled next month. The currency is at 6.56 against the dollar on Friday morning.

Lukman Otunuga, a research analyst at FXTM, stated: “Although the Lira stabilised against the Dollar this morning, gains may be capped by concerns over double-digit inflation, a deepening account deficit, and looming US sanctions.”

He added: “Emerging market currencies are likely to remain pressured by the economic turmoil in Argentina and Turkey, while external factors ranging from global trade tensions and prospects of higher rates could intensify the pain.”

The replacement of Kilimci will be appointed by Recep Yayyip Erdogan, the President of Turkey. He has pressured the bank not to raise the interest rates despite the weakening of the currency.

Last Friday, Reuters reported that Erdogan said that the lira was being targeted in an operation, however, he added that the volatility will pass.

Taking during a military graduation, he said that the country was beginning to see the results from its measures to stop the slide of the lira.

The sanctions that were imposed by the United States over the detention of Turkey of Andrew Brunson, an evangelical Christian pastor, have placed pressure on the economy, and some critics have slammed Erdogan of exacerbating the crisis. They claimed that he has too much influence over the central bank.