Turkish President Recep Tayyip Erdoğan on Friday called international credit rating agencies “fraudsters” while promising his supporters that “this too shall pass,” referring to an ongoing currency crisis in the country, the Hürriyet Daily News reported.
The Turkish lira plunged this week to 6,60 against the US dollar from below 6 during Eid al-Adha last week, when markets were closed over the one week holiday. The country has been struggling to increase the lira’s value against foreign currencies, while it has lost almost 50 percent of its value since the beginning of this year.
“Some say that credit rating agencies say this or that. … Forget those fraudsters. They say a lot of things about us,” Erdoğan said, addressing locals in the western province of Balıkesir after the Friday prayer. “These firms are those that increased ratings of states facing bankruptcy four notches at once. They are such a [crime] syndicate.”
His comments came after ratings agency Fitch, which downgraded 24 Turkish banks last month, said on Thursday the 25 percent fall in the Turkish lira since then had heightened risks and could lead to further rating cuts.
Earlier on Friday, Erdoğan addressed newly graduated military cadets in Balıkesir province, where he said that “Turkey will cope with this attack. For those who ask about foreign exchange rates, our answer is: This too shall pass.”
Hours before, his son-in-law and Turkey’s Treasury and Finance Minister Berat Albayrak said rating agencies have been putting in intense efforts to create a pessimistic view of Turkey’s banks.
Fitch’s warning came two days after Moody’s downgraded its ratings on 20 Turkish financial institutions, citing the increased risk of a deterioration in funding. The operating environment is now worse than previously expected, it said.
Speaking at a gathering of small to mid-size businesses, Albayrak also said Turkey was going to continue to take steps to support and protect its currency. Ratings agency Moody’s sounded more alarm about Turkey’s banking sector on Tuesday, downgrading 20 financial institutions and citing the increased risk of deterioration in funding.
The comments from Moody’s are the latest to highlight the risk to Turkey’s banking sector from an ongoing currency crisis. It said the operating environment is now worse than previously expected.
The country has been facing a currency crisis since May, when President Erdoğan went to London to meet with global finance managers, signaling a tight grip on the economy and an insistence on low-interest rates.
After the presidential and parliamentary elections of June 24, Erdoğan’s decision to appoint his son-in-law Albayrak as treasury and finance minister led to more losses in the Turkish lira’s value.
In early August the US sanctioned two Turkish ministers over a court decision to put American pastor Andrew Brunson under house arrest after almost two years of incarceration on “terrorism” charges.
Turkey’s economy management has been struggling to increase the value of the lira, as following the US sanctions, the lira plunged briefly at 7,20, a historic low, against the dollar. The national currency has lost almost 50 percent of its value since the beginning of this year.
On Friday, Turkey has lowered the level of withholding tax on lira bank deposits of more than one year to zero from 10 percent, while raising the tax level on foreign currency deposits of up to one year, Reuters reported, citing the Official Gazette.
It said the withholding tax on deposits of up to one year was cut to 3 percent from 12 percent and the tax on deposits of up to six months was cut to 5 percent from 15 percent.
The tax on forex deposits of up to one year was raised to 16 percent from 15 percent. The changes will be in effect for three months, it said.
Turkey’s Diyanet is in the struggle to keep prices down
As the Turkish lira continues to be hit by losses in value against foreign currencies, the government has been struggling to keep prices down, even going to the extent of using the country’s religious authority, Diyanet, which sent mosques a sermon to read during the Friday prayer, reminding Muslims that black marketing and speculation during the currency crisis are sins.
“[Islam] certainly forbids unlawful profits such as bribery, usury, speculation, black marketing and rigging prices, which challenge moral values and disrupt the peace in the society,” the weekly sermon said, according to the Diken news website.
Earlier this week one of Turkey’s biggest retailers, BİM, known for its cheap prices of basic foodstuffs and consumer goods, hiked the price of 350 items due to the currency crisis.
Company executive Haluk Dortluoğlu on Friday said that the cost of production of imported raw materials had spiked and that in order to maintain production they had to increase prices, according to the Dünya daily.
However, consumers on social media accused BİM of being an “exploiter,” arguing that the increased prices of some goods had nothing to do with the losses in the lira’s value. A tweet that attracts tens of thousands of people’s attention even called on President Recep Tayyip Erdoğan to intervene in the price hikes.
Minister of Trade Ruhsar Pekcan on Friday weighed in on the issue and warned the “profiteers” who take advantage of the currency crisis by increasing prices.
She also stressed that the ministry would watch the markets closely in order to prevent the hoarding of merchandise and speculation.
Accordingly, the ministry on Friday issued a new Commercial Code regulation that labels price increases connected to the currency crisis in goods that were not affected by the lira’s losses in value as “deceptive commercial practices,” punishable by a fine of up to TL 50,000 (around $8,500). (SCF with turkishminute.com)