Turkish Prime Minister Binali Yildirim has urged investors to stay away from a devaluation of the Turkish lira against the US dollar on Sunday, which may weaken Turkey’s currency and cause a drop in consumer spending.
Yildiririm said the devaluation will weaken the value of the lira by up to 2.5 percent, or around US$1.4 trillion.
He warned that the devaluations could cause a “big price drop” for Turkish citizens.
“The devaluation is bad news for Turkish people,” Yildirs statement read, referring to a fall in the value and the prospect of a large price drop for Turkish households.
“The depreciation could cause big price drops for Turkish families, especially for those who do not have savings.”
The currency is trading below US$2.10 and falling against the greenback against the euro, a weaker currency, in the wake of the government’s decision to devalue the riyal against the dollar, which it has done twice in a row.
“It is a very important decision that will be seen by the foreign investors,” Yieldan Cagaptay, a senior adviser to the Turkish foreign ministry, told reporters on Monday.
“There is a lot of interest in the liras value.”
Yildirs announcement comes as the country’s central bank has announced that it will introduce a new currency unit, which is to be known as the “Erdogan dinar,” that will replace the rial.
The new currency will be used in the central bank’s electronic money system and the central government will issue new bank notes that will also be used to buy and sell foreign currencies, as well as other goods and services.
The new currency has been dubbed “the dinar” and is expected to be ready for introduction by the end of the year.
Yieldan said that the dinar will be introduced on December 8, but he did not give a date for its official launch.
He also said that foreign banks will be required to use a new bank note to conduct business, as is currently the case with bank notes issued by the central Bank.
In the first round of devaluations, the central banks of Iceland and Cyprus each devalued their currencies by 10 percent, but Yildiri said the dinars would be different.
He said the Turkish government has been working with foreign banks on a solution, but it was still not certain when the new dinar would be issued.
“We want to see this new dinars issued by a major foreign bank.
The currency unit of the central authorities is not a big issue.
The dinar is a small issue,” he said.
Youssef Zafer, head of the foreign exchange strategy department at IHS Global Insight, told Al Jazeera that Turkey was considering other measures to support its economy, including increasing its foreign reserves and selling foreign assets.
The central bank, however, has warned that further devaluations will not help the economy and could actually hurt Turkey.
The Turkish central bank is due to hold a meeting of its Monetary Policy Committee on Monday to discuss the currency devaluation and the impact on the economy.