Türkiye’s banking watchdog has announced additional measures to support the country’s tightening drive, including stopping allowing credit card payments by installment for foreign travel, such as flights, travel agency fees and accommodation.

The move, which hit airline shares and was seen as curbing foreign currency outflows, was one of two measures announced by the Banking Regulation and Supervision Agency (BDDK) late on Monday, which it said were among coordinated steps to strengthen financial stability.

Turkish authorities have recently taken steps aimed at reining in chronic high inflation and reducing domestic demand, with the central bank hiking interest rates by 900 basis points in two months alongside other tightening measures.

Last week, the country’s central bank announced a new set of measures that included raising the monthly maximum interest rate on credit card cash usage and overdraft accounts. It said the increase was designed to control inflation and balance domestic demand.

The measures came days after the Central Bank of the Republic of Türkiye (CBRT) slashed its benchmark policy rate by 250 basis points to 17.5%, the highest level since October 2021, and promised more tightening. The last two months it has marked a reversal from an easing drive that saw the bank cut its official borrowing costs to 8.5% from 19% since 2021.

Tourism operators say they have been hit in recent years by soaring costs and a decline in the Turkish lira, which has lost half its value against the U.S. dollar since end-2021, with travelers commonly using credit cards to finance trips.

"Almost all of my clients were paying by installments," said Cem Polatoğlu, spokesperson of a tour operators’ platform, noting an average trip for two costs around TL 50,000 ($1,850). "The number of people who can pay this amount in one go is very few."

"The logic (of the step) is ‘citizens shouldn’t go abroad and spend foreign currency,’" he said, adding that the foreign travel sector was also being hit by increasing difficulties faced by Turks in securing tourist visas.

Polatoğlu forecast a sharp fall in the numbers going abroad after a surge in spending by Turkish citizens abroad in the first half of the year to $3.17 billion – an 84% increase from the same period in 2022 – with such spending facilitated by credit card outlays.

The credit card move also impacted airline share prices, with Turkish Airlines dipping 1.3% and the airline Pegasus dropping 2.3%. Istanbul’s main BIST 100 index was 0.4% lower.

The BDDK also said in a statement late on Monday that it had decided to increase the risk weightings taken into account in calculating capital adequacy standard ratios for consumer loans, personal credit cards and vehicle loans.

Economists expect inflation, which cooled to 38.21% in June, to surge by year-end due to the lira’s decline and various tax hikes. It had peaked at a 24-year high of 85.5% in October last year.

The central bank last week raised its end-2023 inflation forecast sharply to 58%, vowing to continue gradual monetary tightening. The bank’s year-end forecast in its previous inflation report three months ago was 22.3%.

The end-2024 inflation prediction has been raised to 33% from 8.8%. The forecast for the end of 2025 stands at 15%.