Turkey's Prime Minister Tayyip Erdogan Reuters
Turkey’s government aims to pass an economic legislation package ahead of next month’s renewed Istanbul mayoral election, the Hurriyet newspaper reported on Friday, including the transfer of the central bank’s legal reserves to the Treasury.
Reuters reported on Monday that the Treasury was crafting legislation to transfer the Turkish central bank’s 40 billion lira ($6.60 billion) in legal reserves to the government’s budget, the latest unorthodox attempt to pull the country out of recession and help the ailing lira currency.
Last week, sources told Reuters that Turkish state banks had sold around $4.5 billion, including a flurry of late selling on Friday to rein in the losses in the lira triggered by a decision to re-run Istanbul’s mayoral election.
On Friday, the pro-government Hurriyet said four legislative proposals would be presented to parliament after being finalised in a meeting attended by President Tayyip Erdogan. It said parliament would pass the proposals and later focus on election campaigns for the June 23 re-run of the Istanbul vote.
The lira has come under renewed pressure in the past two months partly due to investor worries over the central bank’s depleted foreign exchange reserves and uncertainty over the fate of the Istanbul vote.
The central bank’s “legal reserves” are what it sets aside from profits by law to be used to defend against crises in extraordinary circumstances. At the end of last year, they stood at 27.6 billion lira, according to the bank’s balance sheet data.
The proposed legislative package is seen including energy sector loan restructurings, incentives in the tourism sector and paid military service, Hurriyet reported. It is expected to be discussed at the Parliament next week.
Earlier this week, Reuters reported that Turkey’s plans to clean up some $13 billion in bad energy loans, one of the worst hangovers from last year’s currency crisis, was taking shape even as some banks hold out for the government to agree to safeguards and higher electricity prices.
Ankara is working with lenders to craft legislation that would protect them from sharp losses as the debt is removed from their books, safely packaged as funds, and sold to foreign investors perhaps after a couple of years, several sources close to the matter told Reuters.