CBRT Revamps FX Conversion Support: Value-Added Allocation Mechanism

The Central Bank of the Republic of Turkey (CBRT) has published a new decree in the Official Gazette, introducing a value‑added framework for firms converting foreign currency earnings into Turkish Lira.

Value‑Added Based Support Framework

■Limits are set based on a firm's value added, profitability, and labor costs.

■This limit triggers the 2% base support rate proportionally to the company’s production contribution.

■A 3% support payment, applicable to 35% of export revenue, is extended temporarily until January 31 2027.

New Powers for Intermediary Exporters

■Intermediary exporters can now execute FX conversion on behalf of high‑value‑added suppliers.

■Conversion support is deposited directly into the supplier’s account, strengthening the role of intermediary banks.

■Firms' FX positions must not exceed an upper ceiling determined by the CBRT prior to the support application.

Rate and Duration Extensions

■The 2% base rate remains unchanged, while the 3% support and 35% export‑revenue ratio are extended to January 31 2027.

■These temporary measures, previously set to expire on July 31, are prolonged to maintain market stability.

Market and Liquidity Implications

■Value‑added limits could boost FX demand from high‑value‑added exporters, increasing FX liquidity activity.

■Enhanced responsibilities for intermediary institutions may compress spreads and lower transaction costs.

■The ceiling on FX positions is expected to curb speculative flows, potentially reducing currency volatility.

Markets anticipate that this structural reform will enhance the effectiveness of FX conversion support and improve liquidity flows, especially in high‑value‑added sectors. However, the strict enforcement of the new ceilings may impose a short‑term stability pressure on FX demand; HFT algorithms are likely to recalibrate positions with the new limits in mind.