Turkey’s government has taken fresh steps to keep exchange rates under control as a resurging dollar threatens to further weaken the Turkish lira, although such interventions erode confidence in the economy, which is still ailing after a big currency shock in 2018.

Few would disagree that controversial measures to shield the lira have meant a de facto departure from Turkey’s floating exchange rate regime over the past year. Foreign exchange rates have been regulated — or, rather, suppressed — through veiled interventions by the central bank. To keep the lira below six against the dollar, the central bank has often funneled foreign exchange to the market via state banks, using money that it could have kept as reserves. Such moves amount to political manipulation of foreign exchange prices, given the tight control the government has attained over the central bank since last year.

In a fresh step to that effect, the Banking Regulation and Supervision Agency (BDDK) announced Feb. 9 new limits to foreign exchange transactions. The agency cut the limit for Turkish banks’ forex swap, spot and forward transactions with foreign entities to 10% of a bank’s equity, a move that effectively aims to curtail transactions that could raise hard currency prices. The limit had already been halved to 25% in August 2018, when the currency crisis hit.

President Recep Tayyip Erdogan and others in charge of the economy under the Justice and Development Party (AKP) have blamed Turkey’s currency woes on foreign actors who allegedly mount speculative attacks on the market to send hard currency prices up in a bid to crash the Turkish economy and, by implication, take down the AKP.