Turkish central bank injects dollars, euros to stabilize markets
The Turkish central bank injected dollars and euros into the financial system on Monday, February 26,and the free-floating lira firmed sharply as markets looked to politicians to draft a durable economic plan, an analyst said here. The lira rallied to show a net post-floatation loss of 27.9 percent, compared to a loss off 36.1 percent late on Friday, and the stock index rallied by 6.4 percent, almost recovering from a slump of 18.1 percent on Wednesday.
The central bank had said it would intervene to provide the cash-starved market with lira and dollars. The Anatolia news agency quoted the bank on Monday as saying that "the markets' requirements in dollars will be satisfied quickly". The overnight lending rate which had shot up to 4,000 percent fell back to around 150 percent. An analyst estimated the central bank had injected $815 million (895 million euros) and 20 million euros, providing funds for three days at a rate of 40 percent.
An Istanbul-based foreign banker told AFP on condition of anonymity: "This is a provisional measure until the government outlines its new economic strategy." The lire was changing hands at 956,485 to the dollar, compared with 1,079,375 on Friday and 689,000 on Wednesday.
The Istanbul stock market rose by 6.4 percent from its close on Friday, with the IMKB index at 8,880 points, up by 535 points. It has thus recovered almost all the ground it lost since "black Wednesday," when it plunged by 18.1 percent because of fallout from the political crisis between President Ahmet Necdet Sezer and Prime Minister Bulent Ecevit.
But analysts have insisted that a durable solution to the country's financial crisis depends on a longer-term government financial program and the credibility it would provide. Sezer met with Ecevit at a national security council meeting on Monday, the first time they came face to face since Ecevit walked out of a meeting with the president last week, announcing a crisis between the two and unleashing a financial storm.
As the government fought to keep control of the situation, Ankara floated the lira, abandoning the pegged link between the Turkish currency and the dollar, in force since December 1999 as part of an IMF adjustment program.
The following day the currency fell by 36.0 percent against the dollar. The currency link was a key part of a support program for the Turkish economy backed by the International Monetary Fund and strengthened after a crisis which nearly forced devaluation at the end of November. Analysts estimate that eventually the lira will settle at a rate showing a loss of about 30.0 percent.
Turkish treasury undersecretary Selcuk Demiralp has resigned over the financial storm, the television news station NTV said here Monday. His "unexpected" decision after 19 months in the post followed the resignation of Turkish central bank governor Gazi Ercel, which was reported the previous day by the same television station. Neither resignation has been officially confirmed. —(AFP)
© Agence France Presse 2000
© 2001 Mena Report (www.menareport.com)