Turkish Finance Minister says 'no risk' to economy as lira continues slide

Albayrak seeks to assuage concerns but investors have yet to be persuaded by Ankara's helmsmanship of the economy.

ANKARA - Turkey's Treasury and Finance Minister has said he does not perceive any 'big risk' to the country's financial system, but the Turkish lira showed no sign of recovery as it slid further against the US dollar on Wednesday, hours after Moody's downgraded its credit ratings on 20 Turkish financial institutions.

The currency has been hit by concerns over monetary policy under President Recep Tayyip Erdogan but deteriorated further this month after a public spat with the United States.

The lira lost nearly a quarter of its value against the greenback in the past month and over 40 percent since January.

The lira was trading at 6.4 to the dollar around 1100 GMT on Wednesday, a loss of 3 percent. The lira lost a similar percentage against the euro, trading at 7.5.

After last week's long public holiday, the lira fell further on Monday with economists warning the fears over the health of the Turkish economy remain.

Ratings agency Moody's on Tuesday downgraded 14 banks by one notch and four others -- including major lenders Denizbank and Is Bank -- by two notches.

The Turkish central bank on Wednesday morning reiterated that it would provide banks with "all the liquidity that they needed" as it doubled banks' borrowing limits for overnight transactions from levels before August 13, effective from Wednesday.

The Turkish statistics office also announced the economic confidence index fell to 83.9 in August, down from 92.2 in July and 104.9 in January. The reading is the lowest since March 2009.

With inflation running at close to 16 percent and the current account deficit widening but the central bank refusing to tighten monetary policy, investors have yet to be persuaded by Ankara's helmsmanship of the economy.

And the spat with the United States over a detained American pastor prompted Washington to slap sanctions on two Turkish ministers and double tariffs on aluminium and steel imports from Turkey, prompting further misery for the lira.

Earlier in August, the lira reached above seven to the dollar for the first time ever.

Washington has threatened to hit Ankara with further sanctions if pastor Andrew Brunson is not released from house arrest, with President Donald Trump insisting Brunson is innocent.

No big risk?

Turkish Treasury and Finance Minister Berat Albayrak -- also Erdogan's son-in-law -- has sought to assuage investors' concerns by insisting that his medium term plan to be announced early next month will tackle the issues bedevilling the Turkish economy.

Albayrak does not expect a big risk to the economy or financial system, he was quoted as saying on Wednesday, amid what investors say is a widening crisis caused by a sell-off in the lira.

However, the newspaper Hurriyet quoted Albayrak, who is Erdogan's son-in-law, as saying he did not see a major threat to the economy.

"We do not see a big risk about Turkey's economy or financial system," he told reporters on his flight back from Paris earlier this week, according to Hurriyet.

There were no risks because Turkey's net public debt and household debt are low and its financial system is strong, Albayrak said.

Albayrak has signalled that Turkey wants to mend its ties with the European Union as it faces what he said are moves by the United States that threaten the global economy. He and Erdogan have also emphasised that Turkey would aim to trade in local currencies rather than use the dollar.

The newspaper also quoted him as saying that steps would be taken to prevent foreign currencies from being used for real estate and shopping-mall store rents and sales.

Retailers in Turkey's malls, which often pay their rent in dollars, have also said their businesses were suffering due to the ailing lira.