Turkey's depletion of foreign exchange reserves and the fact that a majority of its forex reserves are swap lines has created mass distrust in the economy, Turkish Industry and Business Association (TÜSİAD) Chairman Simone Kaslowski said. Turkey needs to “ensure full market confidence” to attract long-term financing flows, Kaslowski said during a videoconference on Sept. 24.
Ali Rıza Güngen writes: In Turkey, a portion of the risk stemming from foreign currency loans has been transferred to the public. In other words, not the individual debts but the risk has been spread to society.
The Turkish Central Bank on Aug. 20 kept its one-week repo rate – also known as the policy rate – constant at 8.25 percent, holding it unchanged for the third straight month. "The gradual normalization of pandemic-specific financial measures and recent tightening steps taken in liquidity management are judged to support macrofinancial stability," said the bank statement.
For a long time, Ankara had eroded foreign currency reserves worth near 100 billion to hold the rate. Now, it has come to the end of the road. It has spent its last penny and left the rate to the markets. Thus, the “unheard of” invented exchange rate regime has collapsed.
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.
Former advisor for Turkish Treasury: Excluding swap lines, central bank reserves $13.4 billion in the red
Excluding swap lines, Turkey's Central Bank's net reserves stood at $13.4 billion in the negative as of the end of April, according to economist and former Treasury Advisor Mahfi Eğilmez. The primary reason behind the foreign currency reserves falling by $28.5 is the sale of the Central Bank reserves, he argued. Eğilmez also said that there has been a decrease of $1.5 billion in foreign currency bank accounts in the past week.
In those countries where it is presented as they have a “floating exchange rate regime,” if their central banks are intervening at the exchange rate, the name of this in economy literature is “fear of floating.”
Turkey was caught with the coronavirus outbreak at a time when it was weak structurally. Just like in the COVID-19 epidemic, the underlying disease story is the story of those problems in economy which were “swept under the carpet” for a long time. Turkish government's economy policies after 2018 were based on bans, limitations and covering up of the symptoms rather than resorting to necessary steps to solve the problems.
One of Turkey's largest supermarket chains has closed the 2019 fiscal year at a loss of 492,112 Turkish Lira (over $75,000), an independent audit revealed to the Public Disclosure Platform (KAP). A company balance sheet revealed half of the company's total liabilities to be in foreign currencies, indicating the 2019 losses for Migros could have been triggered by the fluctuations in foreign currency exchange rates.
The gold and dollar exchange rates in Turkey surged to record highs Feb. 24, dropping again on Feb. 25 after markets opened and traders started to sell. Dollar prices rose as high as 6.16 TL during the day, marking a new high for the last 9 months. The price of 1 ounce of gold reached $1,688, and the price of one gram of gold reached a record price of 334 TL.
The total amount of Turkish lira held in bank accounts in Turkey reached the 1.2 trillion TL mark, while accounts denominated for foreign currency held $224.7 billion, according to recent Central Bank figures pertaining to the week ending on January 31. The amount of consumer credit stood at 460.5 billion TL, while the amount of installment commercial loans totaled 379.5 billion TL. More than a third of the consumer credit, 188.8 billion TL, pertained to mortgage and housing loans.