Sign up for our Middle East newsletter and follow us @Middle East for news about the region.
Turkish President Recep Tayyip Erdogan said authorities used $ 165 billion in central bank foreign exchange reserves to deal with developments in 2019 and 2020 and that they could use them “again when needed.” .
“The central bank currently has reserves of about $ 90 billion,” he told Ankara lawmakers on Wednesday. “These reserves can be reused when needed or can increase above $ 100 billion” in the future, Erdogan said, referring to the monetary authority’s total gross reserves.
Recep Tayyip Erdogan on April 21.
Photographer: Adem Altan / AFP / Getty Images
The lira extended its fall against the dollar during its speech and traded 0.8% at 8.1771 at 16:10 in Istanbul.
Turkey’s main opposition, the Republican People’s Party, is Demanding officials explain a fall in foreign reserves during the period when Erdogan’s son-in-law Berat Albayrak was treasurer and finance minister. He held the position from July 2018 to November last year.
On Wednesday, Erdogan accused the party of spreading a “huge lie” by implying that $ 128 billion “has been wasted or stolen.”
World banks, including Goldman Sachs, predict that more than $ 100 billion will be spent on central bank reserves to prevent a disorderly depreciation of the lira just last year, when the currency came under pressure after a series of big rate cuts to support the economy affected by the pandemic.
In 2019, Turkey initially increased foreign currency sales as the lira weakened in the run-up to the municipal elections, and continued to rework the ballot in Istanbul that Erdogan’s AK party lost. Geopolitical tensions with the US later that year affected the currency.
Erdogan said Wednesday that $ 165 billion was used in central bank reserves to fund current account deficits and capital outflows and meet the demand for foreign currency and gold from local investors. The president said much of the money remained in the country while the central bank conducted exchange rate transactions through market-creating banks.
Turkey’s total gross reserves, including gold and money held by the central bank on behalf of commercial lenders, have fallen by more than 15% since early 2020 to $ 89.3 billion in April. Net international reserves fell more than 75% to $ 9.9 billion, while money lent to banks with short-term swaps reached tens of billions of dollars.
When these swaps are removed from net reserves, they fall below zero, according to Bloomberg calculations.
In a written interview following his appointment last month, new governor Sahap Kavcioglu said the central bank would maintain its goal of increasing foreign exchange reserves and that “it could use tools to increase reserves on appropriate terms.” .
(Updates with more details.)