Turkish textile sector, the main driver of the country's exports, has raised its concerns about the overvaluation of the lira and warned that they are on the verge of collapse.

Textile sector blaming 'lira' - 07 / 08 / 2008 14:35

Textile sector representatives met with Industry Minister Zafer Caglayan in Ankara, Referans daily reported on Thursday. Sector representatives told Caglayan that they are ready to "hand in the keys of the factories" to the government if the lira remains at 1.15 levels against the dollar, the report said.

The Turkish lira had been a popular instrument in carry-trades. The benchmark interest rate is 16.75 percent, the highest in the world. The Financial Times said lira is 53.7 percent overvalued against the dollar. The lira rose above the 1.15 levels versus dollar after political concerns faded.

The representatives also said they had no more power to meet the increased costs and the strong firms were on the brink of bankruptcy.

The lira had gained 13 percent against the dollar since its peak of the year at 1.34.

Turkish exporters and representatives blame Turkish Central Bank's policies. The business world criticizes the central bank for maintaining its tight monetary policy, while the bank says measures must be taken against double-digit inflation figures and that price stability should be maintained.

The exports of the textile sector rose 9.4 percent in June compared to last year's same month, however with the calculations based on the euro/dollar parity, the exports of the sector fall 3.8 percent, representatives told the minister, citing the figures of the Turkish Exports Council.

"We hoped the new government (formed after the July 2007 elections) would pursue policies that would increase the competitiveness of the Turkish industry which would help us to compensate our losses in the last five years. However the extraordinary price increases in energy had erased all hopes," Referans quoted Umut Oran, the head of the ready-wear sector association, as saying.

Referans