Foreign funds started flowing after Turkey addressed concerns, deputy PM says

Foreign funds started to flow after international concerns about Turkey’s monetary policy were largely addressed during meetings with investors in London, Deputy Prime Minister Mehmet Simsek said on Sunday.

“The concerns over monetary policy was mainly relieved. That is very clear. Hence, fund inflows have started,” Simsek said in an interview broadcast on Kanal7 television.

Turkey’s currency has fallen around 20 percent this year, hit by investor concern about the independence of the central bank and President Tayyip Erdogan’s tightening grip on monetary policy after elections on June 24.

Read: Turkey unveils $6bn investment package in run up to election

Erdogan, a self-proclaimed “enemy of interest rates”, wants lower borrowing costs to fuel credit growth and economic expansion.

Earlier this week, Simsek and Turkish Central Bank Governor Murat Cetinkaya met with investors and dialled back on Erdogan’s combative message to markets on interest rate policy, saying the central bank is free to defend the lira.

“The depreciation in lira after the meetings is due to the rating agency statements and partly connected with forex demand of companies and citizens,” Simsek also said on Sunday.

On Friday, Moody’s put Turkey’s rating on watch for a downgrade, citing concern over economic management and erosion of investor confidence. Fitch placed on negative watch 25 Turkish banks’ ratings.

The central bank raised interest rates by 300 basis points to 16.50 percent in an emergency meeting last month to put a floor under lira which has hit a record low of 4.9290 against US dollar.

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