The Turkish deputy prime minister denies that the country is in a currency crisis despite several interventions by the central bank to prop up the Lira.
The currency has been under pressure as investors worry about the economic and political turmoil seen in the country.
"Lira has been under pressure. Largely affecting traumatic experiences of last year and terror attacks in Turkey. And of course there's also a structural current account deficit. But, it's quite likely that this is not going to last for longer, simply because policy response is in the making," Mehmet Şimşek, deputy prime minister of Turkey, told CNBC in Davos.
Just like other emerging markets, Turkey has been impacted by promises of higher interest rates in the U.S. But terrorist attacks and the several steps by Turkish President Recep Erdogan to increase his powers have made the situation worse, making the lira the worst performing currency so far this year. Erdogan has also been opposed to interest rate hikes as the cost of credit would rise.
The central bank has intervened to prop up the currency: it increased rates last November, surprising markets, and some analysts expects further rises this month.
"The Central Bank has responded, and this is likely to continue," Şimşek told CNBC. "We are concerned about the implications for inflation, price stability ... we have to pay attention to all of that. But clearly, this also to do, as I said, with the uncertainty surrounding the Constitution amendments," the deputy prime minister added.
Turkey is voting on reforms to the constitution this Friday. Once approved in parliament they will be put to a referendum in the spring. This will then give broader powers to Erdogan.
"Once we get clarity on this front I believe that Turkey will be back on track because we do have a very strong reform agenda. And this constitutional amendment will provide visibility on the political front. And therefore we're not in a currency crisis. We're just experiencing some adjustment, and that's not likely to cause permanent damage," Şimşek told CNBC on Friday.
"The message is simple, straight forward: Fundamentals have not changed. Turkey is still one of the very few emerging markets, with a population of more than 80 million people with a per capita GDP more than $10,000," he added.