Turkey Tees Up Funding for Foreigners Who Won’t Short Lira

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Turkey is planning to offer local-currency liquidity to foreigners at the same rate as domestic investors, so long as the funding doesn’t reach those betting against the lira, Bloomberg News reported. Under a program designed by the Treasury and Finance Ministry and expected to go into effect early next month, offshore investors will be able to access a new swap line with a maturity of at least three to six months to buy local assets, according to an official with direct knowledge of the matter. While Turkey will place no restrictions on the kind of lira securities that foreigners can purchase, it will try to prevent possible short selling of the domestic currency by asking custody banks involved in the transactions to collect information from their customers so it can possibly be used for audit purposes, the official said. The approach reflects a balancing act by Turkey as it takes a looser grip on foreign investors. The latest plan would represent the most significant step away from years of a more combative policy and blaming of speculators for stoking declines in the lira. Turkey’s central bank is also working on a separate plan to attract inflows of hard currency. Its terms may change after initial discussions focused on offering foreigners lira funding free of interest and guaranteeing a 4% return in dollars. Read more.