President Recep Tayyip Erdoğan on Monday voiced support for the government's economic program and said they were determined to safeguard economic gains and ensure the healthy functioning of the market, after volatility and protests over the jailing of Istanbul’s mayor.
"We will never allow the gains we have made from the economy program implemented in the last two years to be harmed," Erdoğan said after the Cabinet meeting. "Our institutions have both the authority and the will to ensure healthy market mechanisms."
The detention last Wednesday of Istanbul Mayor Ekrem Imamoğlu plagued markets, sending the Turkish lira, stocks and bonds sharply lower. On Sunday, a court jailed him, pending trial, on corruption charges.
The assets on Monday and Tuesday recouped some of last week's losses as authorities acted to stabilize the market and pledged to use all tools at their disposal.
Erdoğan said protests over the jailing of Imamoğlu had become a "movement of violence" and that the main opposition party would be held accountable for injured police officers and damage to property.
He criticized Imamoğlu's Republican People's Party (CHP) for its response to corruption operations, saying it disregarded the law and caused an unfounded, artificial fluctuation in the economy.
The government repeatedly denied allegations by CHP that the investigations were politically motivated and said the courts are independent.
"When the illusion fades, the meaninglessness of what has happened will become clearer," Erdoğan said.
"Our main priority is protecting macro-financial stability. The Treasury and Finance Ministry, central bank, all relevant institutions, with our support, are working day and night in full coordination, taking every necessary step," he noted.
H assured that the gains achieved through the two-year medium-term economic program would be preserved.
On Monday, Istanbul stocks rebounded nearly 3% while the lira held steady against the dollar. The Borsa Istanbul Stock Exchange benchmark BIST 100 index ended last week down 16.6%, its worst drop since the global financial crisis in October 2008.
The index was up 2.45% at 0802 GMT while the banking sub-index traded 2.7% higher at 0802 GMT on Tuesday, after last week's more than 26% tumble.
Erdoğan said authorities would continue to take all necessary measures "with a proactive and flexible approach."
"In the upcoming period, we will continue our economic program without compromise, resuming from where we left off," he said.
In the latest effort by the government to calm markets, Treasury and Finance Minister Mehmet Şimşek and Central Bank of the Republic of Türkiye (CBRT) Governor Fatih Karahan are due to hold a teleconference call with international investors on Tuesday.
The Treasury and Finance Ministry confirmed that the call would happen at 1 p.m. GMT and would be hosted by Citigroup and Deutsche Bank to "assess the latest developments in the Turkish economy."
The Treasury, central bank, the Banking Regulation and Supervision Agency (BDDK), and Capital Markets Board (SPK) held a series of meetings with market actors over the weekend and announced several steps.
The measures had begun with the central bank raising the upper band of the interest rate corridor by 2 points to 46% in an unscheduled meeting last week, pausing funding from the policy rate.
While the central bank took a tightening step of close to 400 basis points, it has also started liquidity note issuance and lira-settled forward foreign exchange sales transactions.
"With lira-settled forward foreign exchange sales, the aim is to reduce market volatility and enhance predictability," Şimşek said on social media platform X.
The central bank launched the transactions on March 20, seeking to prevent exchange rate fluctuations and balance foreign exchange liquidity.
In the first two days, the bank conducted lira-settled forward foreign exchange sales amounting to a total of $1.12 billion.
Also, the Capital Markets Board (SPK) has banned short-selling across all stocks on the Istanbul bourse and eased share buyback limitations and equity ratio requirements until April 25 to prevent further equity losses.
The cost of insuring Türkiye bonds against the risk of default has risen to the point where traders are now effectively pricing in a credit rating downgrade.
That is unlikely in the short term, however. Both S&P and Fitch have "stable" outlooks on their BB- Türkiye ratings, while Moody's has a "positive" outlook on its B1 score, which is one notch lower than S&P and Fitch's level.
