Istanbul January 26 2023: Turkey will provide a more favorable exchange rate to exporters that convert their foreign income into lira and don’t use the proceeds to buy hard currency for some time.
The central bank will offer a 2% premium on the current exchange rate for companies repatriating their earnings, according to an announcement published in the Official Gazette. The mechanism will apply to exporters who “make a commitment” not to buy foreign currency for a period that will be disclosed by the monetary authority.
The decision follows complaints from exporters that the lira is “overvalued” and worried about losing their competitive edge abroad. Some industry groups have called for a devaluation or an alternative exchange rate, putting pressure on the government ahead of elections slated for May.
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Exporters are already required to sell 40% of their earnings abroad to the central bank. Under the new regulation, they will also be able to benefit from a preferential exchange rate by placing the remaining 60% of their foreign proceeds in lira savings accounts or so-called FX-protected deposits.
Exporters that fail to abide by their commitments will have to make payments to the central bank using a difference in the exchange rate during that period plus the overnight lending rate.
They will also be banned for a year from using rediscount credits, or loans provided by the central bank to exporters in liras but repaid in foreign currency.
The central bank said the decision is a part of its “liraization” strategy that encourages wider use of the local currency. It is a cornerstone of an effort to keep the lira stable and steady inflation ahead of elections.