Turkey pledges action to calm markets


A general view of Fatih Mosque and the area around at sunset. On Tuesday, 17 October 2017, in Istanbul, TurkeyImage copyright

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A view across Istanbul

Turkey has pledged it will take action to calm markets after the lira plunged to a new record low in Asian trading.

The details would be unveiled shortly, the country’s finance minister told Turkish newspaper Hurriyet.

“From Monday morning onwards our institutions will take the necessary steps and will share the announcements with the market,” Berat Albayrak said.

On Friday, the lira lost 20% of its value versus the dollar. It had already fallen more than 40% in the past year.

Mr Albayrak said the country would “act in a speedy manner” and its plan included help for the banks and small and medium-sized businesses most affected by the dramatic volatility in the lira.

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Mr Erdogan said the drop in the lira was a “storm in a tea cup”

His assurance came after Turkey’s president blamed the lira’s plunge on a plot against the country.

“What is the reason for all this storm in a tea cup? There is no economic reason… This is called carrying out an operation against Turkey,” he said.

Recep Erdogan once again urged Turks to sell dollars and buy liras to help boost the currency.

“I am specifically addressing our manufacturers: Do not rush to the banks to buy dollars… You should know that to keep this nation standing is… also the manufacturers’ duty,” he said.

Why is the lira falling?

Experts have blamed the drop in the lira on fears the country is falling into an economic crisis.

The Turkish stock market has also fallen 17%, while government borrowing costs have risen to 18% a year, according to Andrew Walker, the BBC World Service economics correspondent.

Meanwhile, inflation has hit 15%.

Investors are worried that Turkish companies that borrowed heavily to profit from a construction boom may struggle to repay loans in dollars and euros, as the weakened lira means there is now more to pay back.

Then there are Turkey’s worsening relations with the US. Donald Trump’s administration hit Turkey’s justice and interior ministers with sanctions last week, a reaction to the detention of American pastor Andrew Brunson, who has been held for nearly two years over alleged links to Turkish political groups.

The US dealt Turkey and the lira a further blow in a tweet on Friday, in which Mr Trump said he had approved the doubling of tariffs on Turkish steel and aluminium.

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