Turkey Economy Bill Doesn't Allow Treasury to Tap Reserves

(Bloomberg) -- Turkey’s ruling party held back from proposing a law allowing the treasury access to the central bank’s reserves, amid speculation the country would need to resort to such a move to help finance its deficit. The lira erased losses.

The AK Party sent a bill to parliament Friday aimed at addressing economic issues, according to an official with direct knowledge of the proposal’s contents. The draft doesn’t include a legislative change that would have enabled the monetary policy authority to finance spending through use of so-called reserve funds, the official said, asking not to be identified.

Reports earlier this week about the government’s plans to allow the treasury access to about 40 billion liras ($6.6 billion) of central bank reserves amplified worries over the country’s fiscal standing. Concerns that fiscal discipline isn’t a priority for President Recep Tayyip Erdogan have hit the the lira, which has already weakened nearly 13% this year, making it the worst performer in emerging markets after the Argentine Peso.

The currency trimmed losses on news that the proposal was sent to the parliament and was trading little changed at 6.0469 per dollar at 4:32 p.m. in Istanbul.

Erdogan’s AK Party suffered a stinging defeat in municipal elections in March, and is now campaigning to win a revote in Istanbul. Authorities had nullified the opposition’s win in the country’s largest city, supporting his accusations that the vote was tainted by widespread irregularities.

A spokesman for the ruling party’s group at the parliament wasn’t immediately available for comment.

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