Jakarta, CNBC Indonesia – The Turkish lira was the world’s worst currency last year. Against the US dollar, the lira fell more than 44%. But earlier this year the lira was much more stable.
According to Refintiv data, so far this month the lira only weakened 0.76% against the US dollar. On Wednesday (26/1) trading, the lira was in the range of 13,476/US$.
The stability of the lira coincided with the change of the country’s name Turkey (Turkey in English) to Turkiye. This was conveyed by the President of Turkey, Recep Tayyip Erdogan in a speech last month, and was reiterated yesterday.
“The word ‘Turkiye’ represents and expresses the culture, civilization and values of the Turkish nation in the best possible way,” his speech was quoted as saying by Middle East Monitor, quoted Tuesday (25/1/2022).
“In order to strengthen the name Turkiye, in all kinds of activities and correspondence, especially in official relations with other countries and international institutions and organizations, the term Turkiye will be used instead of terms such as ‘Turkey’, ‘Turkei’, ‘Turquie’ and so on, ” he added.
However, that is not the cause of the stable exchange rate of the lira this month, but the policies taken by the Turkish government when the lira collapsed last year.
Towards the end of 2021, Erdogan announced several policies that would ease the burden on the Turkish lira. The leader, who has been in power for 20 years, said the policy meant that Turkish citizens would not have to convert the lira into foreign currency during the lira crash, including providing deposit guarantees.
“We present a new financial alternative for citizens who want to ease their worries when they see savings due to rising exchange rates,” Erdogan said.
The Turkish government will provide incentives for its citizens to convert their foreign exchange savings into lira deposits.
“If a Turkish citizen has deposits or deposits in foreign exchange such as US dollars, euros or pounds until December 20, and converts them into lira deposits/participation funds, they will be eligible for incentives,” the central bank of Turkey (TCMB) said. ).
“The deposits in question have maturities of three, six, and twelve months,” added TCMB.
The incentive given is that TCMB will cover if there is a foreign exchange difference when opening a deposit until maturity. In other words, Turkish citizens will not experience foreign exchange losses if the lira slumps again. In addition, the deposit is also not subject to tax.
In addition, last week, the Turkish Parliament also approved a law that exempts corporate income taxes from deposits in the form of lira. This can be obtained by the company if it converts its deposits which are currently in foreign currency into lira.
Reuters citing data from Turkey’s central bank (TCMB) reported companies in Turkey have deposits in foreign exchange worth US$ 90 billion. The Turkish Finance Minister saw that with the policy, the company would convert around US$ 10 billion into lira.
CNBC INDONESIA RESEARCH TEAM