Can the forex loss in Turkey be recovered without sending the bill to the public? If first signs of the establishment of political normalization, democratization and rule of law emerge in a powerful way in Turkey, then the “shrunken” foreign currencies will come back to the system.
If the ruling Justice and Development Party (AKP) sees an increase in erosion of their votes and the increased possibility of losing power in a possible election then it would "use all the ammunition till it is finished" for their own political continuity. But this would indeed mean leaving a “gigantic wreckage” for the citizens of the country.
A main opposition deputy recently slammed the finance minister's comments on Turkey's fiscal success, noting that public debt has nearly tripled in Minister Berat Albayrak's two-year assignment. The deputy added that the Treasury's public debt turnover rate is nearly 200 percent.
Turkey has revoked a requirement that Central Bank deputy governors have 10 years prior experience and dropped a rule that banks set aside 20 percent of annual profit, the Official Gazette showed on July 12. The provision, which envisages 20 percent of the bank's annual profit to be reserved as a reserve fund, has been repealed, the same decree said.
The Turkish central bank’s gross foreign currency reserves decreased by $73 million over the period of June 26-July 3. State banks buying liras and selling dollars in an apparent attempt to prop up Turkey’s currency is seen by many investors as a reason for a gradual drain on the central bank’s foreign currency reserves in recent months.
The trend in that started just before the presidential elections in 2018 and accelerated after the elections changed the chemistry of the economy in Turkey. Private sector in Turkey was restricted in every aspect. From pricing to sourcing, to investment licenses, all regulatory higher bodies worked to make the entrepreneurs feel that ‘the party state’ was watching them at every step.
According to newly surfaced information, Turkey's central bank governor Murat Uysal on May 1 held a phone call with Federal Reserve chair Jerome Powell, Turkish media outlets have said. The phone call took place before Turkey secured a swap line with Qatar on May 20, providing some much-needed foreign funding to reinforce its depleted reserves and help steady the Turkish lira.
Turkey's central bank said on June 19 it had used a funding facility for Chinese yuan for the first time under a prior swap agreement with the People's Bank of China. It added that the move would strengthen cooperation between Turkey and China, and that commercial banks would be able to add products related to trade and financial activities with a strategy based on the swap agreement.
Turkey’s Central Bank has evaded its mandatory briefings to parliament, only performing three of the ten mandatory sessions in the past five years. Lawmakers say that the bank’s reluctance to report to parliament impedes “executive and inspection duties.”
Turkish Treasury and Finance Minister Berat Albayrak has announced that the Central Bank will provide a credit of up to 400 million Turkish liras ($59 million) with a maximum maturity of 10 years to companies which support exports and reduce imports.
The relationship between the government and the capital class is now at a deadlock. While the “Daddy State” maintains order, it now also manages the Central Bank and meddles with foreign currency. And though the AKP-led government is solely responsible for maintaining order, its economic fate depends on external factors.
The construction project for the general directorate building of the Turkish Central Bank's Istanbul Finance Center was awarded to the pro-government Limak Holding company in a closed-doors agreement, according to a report on the daily Sözcü. Central Bank authorities declined to respond to questions from Sözcü concerning other firms that offered bids or the amount of other offers, Sözcü said.
Ankara thinks it can obtain stability through the sale of foreign currency from the “back door,” which erodes reserves. Ankara has also resorted to bans and restrictions on foreign currency, but these are actually very old tools from the 70s.
Turkey’s banking regulator said on May 20 it would exempt Euroclear Bank and Clearstream Banking from recently-imposed limits on lenders’ lira transactions with foreign financial institutions. The BDDK said the move was meant to protect the clearing of lira-denominated bonds and sukuk, and to ensure Turkish lira securities are traded efficiently.
The swap deal limit between the central banks of Turkey and Qatar has been amended to $15 billion equivalent of Turkish lira and Qatari riyal. According to a statement from the Turkish Central Bank on May 20, the move aims to facilitate bilateral trade in respective local currencies and to support financial stability of the two countries.