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After rebounding briefly back over 6.00 against the dollar earlier this week, the Turkish lira has been drifting lower again in the past few days, with the slump accelerating overnight even as most EM currencies rebounded on China stimulus hopes, after Turkey announced it would reintroduce a 0.1% tax on some foreign-currency transactions in the latest desperation move to increase budget revenue for the fiscally challenged nation, but risks further raising investor angst that the government is taking on an larger role in managing the market.
The tax, which had been kept at zero for over a decade, will be introduced on foreign-currency sellers in hopes of limiting the decline in the currency but will accelerate it instead as what little faith is left in the Turkish lira is extinguished. The tax won’t apply to the interbank market and credit transactions, as it is designed "more to discourage FX buying” than to raise funds, according to Erkin Isik, chief economist at QNB Finansbank in Istanbul.
Revenue - Tax - Generate - Trading - Volume
How much revenue will the tax generate? Well, the average trading volume in the local foreign-exchange spot market was $3.6 billion in April, according to central bank data, and according to Isik, the government could add an estimated 200 million liras ($33 million) in monthly revenue to the budget, or about 1.5 billion liras for the remainder of the year. The 12-month rolling budget deficit was 88.4 billion liras as of March, according to Bloomberg calculations using data from the Treasury and Finance Ministry.
In recent months as the lira has resumed its plunge to the record lows hit last...
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