Turkey ruled on Thursday that property sales, rental contracts and leasing transactions must be made in lira from now on, halting the use of foreign currencies for such deals in a fresh step to support the ailing local currency. All business deals inside the country should be conducted in lira, President Tayyip Erdogan said, adding that nobody apart from exporters and importers should cross paths with foreign currency.
“We are solving the issue of rent in foreign currency, which concerns a lot of our vendors, once and for all,” Erdogan told a meeting of a traders’ confederation. “Every business in this country needs to be priced, discussed and carried out with our own currency,” he said, adding that further moves to support the lira were on the way.
However economists and industry participants doubted the move would have a permanent positive impact, saying it hampered predictability and was likely to bring additional burdens for firms with foreign currency debt.
Real estate sales and rental deals in foreign currency are common in Turkey, particularly in the retail sector. In a decision published on Thursday in the Official Gazette, the government said any contracts previously made in foreign currency but which are currently in effect must be converted into lira within 30 days.
The decision also covers contracts for business and services. Contracts cannot be agreed in foreign currency or indexed to a foreign currency.
The lira has lost some 40% of its value against the dollar this year over concerns about Erdogan's influence on monetary policy and a diplomatic spat between Turkey and the United States. In a series of steps to cushion the fall of lira, Turkey has limited derivative transactions, lowered leverage ratios in trading, and required Turkish exporters to convert the bulk of their overseas revenue into lira.
While the moves have put a floor under the lira, many analysts have criticized what they say are unconventional measures to support the lira and the Turkish central bank’s reluctance to hike interest rates decisively.
Erdogan, a self-styled “an enemy of interest rates”, has cast the lira crisis as an “economic war” targeting Turkey and has repeatedly urged Turks to sell their dollar savings to shore up the lira.