Page 16 - TURKRptJun20

year, Turkey’s banking regulator (BRSA) requested that banks wait one day before settling retail FX transactions valued at over $100,000 (the previous practice was to settle on the same day). And there have been efforts to stymie speculation against the lira. On 7th May, the BRSA announced that banks’ lira-denominated transactions with foreign firms will be limited to just 0.5% of their equity, compared with a previous limit of as much as 10%. And several foreign banks were (temporarily) banned from trading lira,” Tuvey also noted.
“But,” he cautioned, “the experience from other countries is that steps to constrain imports ultimately result in shortages of goods and disruptions to economic activity. What’s more, it’s not clear that capital controls would be effective in Turkey. Capital controls tend to work best when the state has strong control over the financial system in order to prevent leakages and when controls are focused on restricting residents’ ability to take money out of the country. In Turkey’s case, it’s not clear that officials have the necessary experience or infrastructure in place to prevent leakages, resident capital outflows are small and fears that controls will be widened may simply deter foreign investors.”
“More fundamentally, neither import compression nor capital controls deal with the fundamental problem of high inflation. Inflation in Turkey is much higher than in its major trading partners and so the lira is under constant pressure to depreciate in nominal terms to prevent the real exchange rate from appreciating and eroding Turkey’s external competitiveness,” Tuvey added.
The analyst also made plain his concern about potential upcoming bank defaults.
2.5​ ​Erdogan and ally ‘may change laws to throw obstacles in way of new political parties’
Two new political parties in Turkey led by former allies of President Recep Tayyip Erdogan are eyeing with concern moves by the ultra-nationalist junior partner of the ruling coalition to change the country’s election, party and parliamentary legislation—with some anxiety that obstacles could be erected to them contesting the next parliamentary and presidential elections.
According to veteran Turkish journalist Zulfikar Dogan, writing for Ahval, Erdogan and leader of the Nationalist Movement Party (MHP), Devlet Bahceli, “appear panic-stricken by the declining support indicated in the latest polls”.
He added: “While both the MHP and its coalition partner, Erdogan’s Justice and Development Party (AKP), say polls are not on their agenda until the next scheduled general election in 2023, a recent move by Bahceli calling for a swift change in six laws that will greatly alter the political process indicates otherwise”.
Erdogan, his AKP and Bahceli’s MHP are expecting a growing challenge from former prime minister Ahmet Davutoglu’s Future Party, launched in December, and former deputy prime minister Ali Babacan’s DEVA, formed in March.
The leader of Turkey’s main opposition Republican People’s Party (CHP), Kemal Kilicdaroglu, last week said that the CHP would be willing to allow the transfer of some of its MPs to the newly formed parties should they wish to form a group that would qualify to enter parliament and fight the next elections.
A day after Kilicdaroglu’s offer was made, Bahceli called for changes in the six laws, including the country’s political party laws, electoral laws and parliamentary bylaws.
16​ TURKEY Country Report​ June 2020 ​ ​www.intellinews.com