Turkey: Amendments to Foreign Exchange Regulations Mandate Use of Turkish Lira for Private Individuals and Entities in Certain Contracts

Turkey: Amendments to Foreign Exchange Regulations Mandate Use of Turkish Lira for Private Individuals and Entities in Certain Contracts

On April 19, 2022, Turkey’s Ministry of the Treasury and Finance published amendments to the country’s foreign exchange regulations in the Official Gazette. (Communiqué No. 2022/32-66 of the Ministry of the Treasury and Finance Amending Communiqué No. 2008-32/34 regarding Council of Ministers Decision No. 32 on the Protection of the Value of the Turkish Lira.) The amendments make it mandatory for private persons and entities resident in Turkey to make and accept payments for performance of contracts for sale of movables in Turkish lira. While parties remain free to set payment obligations in foreign currency in such contracts, payments must now be made in equivalent Turkish lira.

Communiqué No. 2008-32/34 contains rules on the use of foreign currencies and precious metals and stones in transactions and import and export. Among other rules, the communiqué includes rules regarding the import and export of foreign currency, the use of foreign currency in domestic transactions, and the use of foreign currency in domestic banking and finance.

The new communiqué amends article 8(9) and (15) of Communiqué No. 2008-32/34. Article 8(9) permits contracts between persons resident in Turkey regarding the sale of movables, with the exception of contracts for the sale of vehicles, to include foreign-currency-denominated (or pegged) payment obligations. The new rule requires that all payment obligations in such contracts be fulfilled in Turkish currency and that the obligee accept payments made in Turkish currency.

Article 15, on the other hand, allows the contract price and related obligations in contracts to which public entities are a party to be denominated in foreign currency, with the exception of contracts for the sale or lease of real property. Article 15 was amended to allow payments for such foreign-currency-denominated contracts to be made and accepted in foreign currency.

A press statement released by the Ministry of the Treasury and Finance on April 21, 2022, clarified that the new mandate did not prohibit the use of foreign currency in the creation, export, trade, or performance of capital market instruments regulated by Law No. 6362 on Capital Markets (including foreign capital market instruments, depositary receipts, and investment fund shares) and that the use of foreign currency in such transactions remains permitted under article 8(18) of Communiqué No. 2008-32/34. The statement also noted that the ministry must continue to take measures prioritizing the use of the Turkish lira in the context of the free market and combating dollarization in the economy. The amendments to the foreign exchange rules were made following the high increase in inflation in the Turkish economy and the rapid depreciation of the Turkish lira, which has been characterized as a currency crisis by some observers.

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