Finance Minister Albayrak downplays lira's sharp fall via asking 'Are you getting your salaries in dollars?'

Duvar English

Treasury and Finance Minister Berat Albayrak has downplayed Turkish Lira's sharp fall via asking "Are you getting your salaries in dollars?"

In an interview, Albayrak was asked whether the people should be concerned about the lira's recent loss of value since the prices will go up as a result.

"First, let me ask you this; Are you getting your salaries in dollars? Do you owe money in dollars? Do you have any business in dollars?" Albayrak responded on Aug. 12, prompting surprise on social media.

Albayrak, who is President Recep Tayyip Erdoğan's son-in-law, also said that the competitiveness of the lira is more important than the exchange rate level.

The minister noted that Turkey's gross domestic product this year will show between 1 percent growth and 2 percent contraction, after the coronavirus pandemic hit the economy. Analysts expect the economy to contract.

"The exchange rate goes down, it goes up. What is important is that Turkey manages all this volatility in a controlled way," Albayrak said.

"What is important is not the exchange rate, but whether it is competitive," he added.

He also said that "malicious perception operations" do not work on Turkey anymore as the country switched to a "national independence model."

The lira hit a record low of 7.3650 against the dollar last week, a slide of 19 percent from the end of 2019, making it among the worst performers in emerging markets. The lira stood at 7.2840 at 1930 GMT, unchanged from the level before the interview.

Following the slide in the lira's value, the central bank halted cheaper funding which had allowed primary dealers to borrow well below its policy rate in an effort to squeeze credit via backdoor channels and stabilize the currency.

Albayrak said Turkey will miss its budget deficit target this year and the deficit will likely be around 5-6 percent of gross domestic product.

Economists expect Turkey's economy to shrink this year because of the coronavirus pandemic, while further lira depreciation could drive up inflation and the current account deficit and worsen the contraction.

However, Albayrak said the lira will not have as negative an effect on inflation as expected, but said the pandemic may have a 1-2 percentage point impact on inflation.

Annual inflation fell to 11.76 percent year-on-year in July. The government forecast for end-2020 inflation is 8.5 percent, while the latest central bank survey placed it at 10.22 percent.

Expectations have grown that the central bank will formally raise its 8.25 percent policy rate to boost confidence amid concerns over depleted reserves, costly state FX interventions and a trend of Turks buying foreign currencies.

Overnight swap rates in the London market soared above 1,000 percent last week as liquidity dried up, in a sign of what analysts said were renewed state curbs. Referring to the surge in rates, Albayrak said Turkey would not supply lira to people who "speculate to increase the value of the dollar."

During the interview, Albayrak deemed Turkey "one of the most revolutionary countries in the world."

"It revolts against this unjust and unfair system. It's a revolution," he said while raising his fist in the air.