Turkey’s central bank required exporters to convert a quarter of their hard currency export revenues to liras as the decision was taken to boost the central bank’s reserves and support Turkish Lira.
The central bank will buy 25% of all income from exports of goods so long as the exporters receive payments in U.S. dollars, euros or pounds, the monetary authority said in a decree on Monday.
With Turkey’s exporters importing roughly half of their intermediary goods for processing and exporting, the decision will create demand for hard currency by the exporters from the market as they seek to fulfill their import payments.
A similar measure was effective in the country to boost reserves during early 1980’s which was abandoned by the central bank back in 1999.
The measure is aimed at boosting Turkey’s foreign currency reserves by forcing companies to keep some of their revenues from sales abroad in the local currency. It comes after a year of severe losses in the lira, which lost nearly half of its value against the dollar last year as President Erdogan called on the central bank to lower its benchmark interest rate.