Turkey's Central Bank Overhauls Foreign Currency Support System

Turkey's Central Bank (TCMB) has introduced significant changes to its foreign currency conversion support system, aiming to boost its effectiveness in accumulating reserves. The revised regulations, published in the Official Gazette, will take effect on October 1.

A primary adjustment allows firms to benefit from the support in proportion to their added value, calculated based on profitability and labor costs. This means companies generating more value will receive greater support. For intermediary exporters, once their added-value-based limits are met, they can conduct foreign currency conversion transactions on behalf of their high-value-added suppliers. In such cases, the support payment will be directly credited to the supplier's account.

The TCMB has also altered the requirement for firms to not hold foreign currency. This commitment has been replaced by a condition based on their foreign currency position. Firms must ensure their foreign currency holdings do not exceed a ceiling determined by the Central Bank prior to applying for the support. The bank has also strengthened the intermediary role of financial institutions in the application process and implemented additional measures to enhance the system's efficiency.

Furthermore, the duration of the temporary application for a 3% support payment and the 35% export proceeds sales obligation has been extended. Initially set to expire on July 31, this period will now continue until January 31, 2027. The base rate for the foreign currency conversion support has been set at 2%, with the extended temporary measures providing additional incentives.