Turkish lira slips, stocks drop in financial crisis aftermath
The Turkish lira slipped Tuesday, February 27, and the stock exchange dropped by 2.4 percent as investors licked their wounds after financial turmoil sparked by high-level wrangling over corruption. The free-floating lira stood at 991,100 to the dollar, an overall drop of 30.5 percent from its pegged position of 689,000 on Wednesday before a public row between Prime Minister Bulent Ecevit and President Ahmet Necdet Sezer led to a complete breakdown of confidence in the government.
Late Monday, the Turkish currency traded at 978,330 to the dollar. The government dispute erupted three months after a similar financial crisis, and forced Ankara to let the lira fluctuate on currency markets, abandoning the pegged exchange rate that was the cornerstone of an IMF-backed anti-inflation plan.
Meanwhile, the Istanbul stock exchange fell 214 points, or 2.4 percent on Tuesday, to close at 8,666 points, sharply down from the 10,709-point level of February 19 when unprecedented wrangling at the country's higher echelons began to spark fears of political instability. On Wednesday, the index had slumped by a record 18.1 percent, to 8,771 points.
The ensuing cash crunch sent overnight interest rates soaring to 4,000 percent. On Tuesday, average overnight interest rates were at 115 percent on the market for repurchase agreements (repo), and 100 percent for interbank transactions. Interest rates began falling on Monday as the central bank injected foreign currency into the system in what experts said was a short-term fix to ease the liquidity sqeeze and prevent panic until the government can draft a credible new anti-inflation plan.
Turkish Finance Minister Sumer Oral, meanwhile, sought to soothe the markets by stressing the government has the economy under control and is working on new economic measures. He did not say when they would be unveiled, however. —(AFP)
© Agence France Presse 2000
© 2001 Mena Report (www.menareport.com)