Turkey on Thursday, February 22, scrapped a predetermined exchange rate policy in the face of sky-rocketing interest rates amid financial turmoil, but said it would stick to anti-inflation policies. "Due to recent developments, the foreign exchange rate will be left to float," a statement from the prime minister's office said, according to the all-news NTV channel.
The pegged currency rate was a key element of a three-year $4 billion stand-by deal with the International Monetary Fund (IMF) that Turkey began implementing in December 1999 to primarily reduce its chronic inflation. The statement, which came after a 13-hour emergency meeting chaired by Prime Minister Bulent Ecevit, asserted that "the government is determined to strictly follow the economic program."
"Structural reforms will continue as scheduled and all necessary steps will be taken speedily for the privatization of Turkish Airlines and the Turkish Telekom," two priority pledges to the IMF, the statement said. "The financial policies will be implemented meticulously," it added.
The statement said that letting the exchange rate free would provide more revenues from exports and tourism. “The government will continue to protect the working classes against inflation," it said. The decision followed a cash crunch on Turkey's volatile markets, sparked by fears of political instability after Ecevit and President Ahmet Necdet Sezer clashed in an unprecedented row on Monday over ways to fight corruption.
The turmoil on Wednesday sent interest rates on the interbank money market up to an average of 2,056 percent, while overnight repo interest rates shot to an average of some 4,000 percent, hitting 7,500 percent in some transactions.
Turkish share prices plunged 18.1 percent on Wednesday, February 21, due to a cash crunch following a fierce row between the prime minister and the president. The Istanbul stock market national index slumped by 1,587 points to close at 7,180 points and money market rates soared to above 2,000 percent as liquidity tightened. On Tuesday, the stock market had edged up just 0.9 percent after slumping 14.6 percent the previous day. —(AFP)
© Agence France Presse 2000
© 2001 Mena Report (www.menareport.com)
