Turkish Central Bank
The Central Bank of the Republic of Turkey (CBRT) continues to be a part of the economic policy conducted by the government. The ground of the economic crisis was laid with the fire of a political crisis. It moved to a new level with the pandemic. Now, there is no possibility left that the Central Bank helps bounce back or curbs the situation.
The lira sank to a record low to near 8 versus the dollar after Turkey’s central bank ignored investors' calls to raise its main interest rate. The decision to leave the rate unchanged prompted economists to question the central bank’s commitment to lowering inflation and its independence from the government.
Turkey's net international investment deficit grew by $20 billion from the end of 2019 to reach a total $365.8 billion at the end of August. Turkey's international assets shrunk by 10.2 percent to reach $227.4 billion in the same period.
Turkey's Central Bank's net international reserves shrunk to $16.8 billion by Oct. 2, the bank reported on Oct. 8. Turkey's net international reserves totaled $40.9 billion in January, but had more than halved by Sept. 25, measuring a mere $16.9 billion. The Turkish Lira also hit a new low of 7.9389 against the dollar.
Turkey's Central Bank announced that the real effective exchange rate (REER) of the lira hit the lowest level in 27 years, as souring relations between Ankara and Brussels added to the country's geopolitical woes, bringing lira to 7.88 against the dollar. The Central Bank's real effective exchange rate index sunk to 62.21, dropping by 1.59 points and falling below the former record low it observed during the 2018 Pastor Bronson crisis.
Turkey's banking regulator on Sept. 28 lowered the asset ratio calculation for deposit banks to 90 percent from 95 percent and for participation banks to 70 percent from 75 percent, in a bid to boost the lira. This came at a time when the country is making efforts to lasso inflation and support price stability, trying to calm down the markets.
The Turkish Lira hovered near its historical low against the dollar on Aug. 31 as the Turkish statistical authority revealed a contraction of 9.9 percent in the economy. The currency has lost about 19% against the greenback this year.
Turkey is poised to produce a record amount of gold this year and the Central Bank will probably buy all of it at prices near record highs, Bloomberg reported on Aug. 24. The value of its gold reserves surged to an all-time high in the week through Aug. 7, only to drop 5 percent a week later, the biggest decline in five months. That effectively mirrored the moves in market prices over the same period.
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.
Turkey's Central Bank on Aug. 19 cut the overnight limit for interbank money loans in half in an attempt to improve liquidity. The Turkish Lira has tumbled to record lows against the dollar over the last month, proving Ankara's currency interventions futile.
The International Monetary Fund (IMF) didn't ask to borrow money from Turkey, former Central Bank head Durmuş Yılmaz said to refute President Recep Tayyip Erdoğan's claim. "This is a lie. The issue is technical. In short, the IMF didn't ask to borrow money from us. A commitment was made to a contingency fund and it wasn't realized. The proof: There is no such record on the Central Bank balance," Yılmaz tweeted on Aug. 11.
Turkey's lira hit a record low of 7.32 against the dollar after losing nearly 19 percent against the greenback so far this year, with growing concern that state efforts to stabilize the currency could fizzle and spark bigger problems for the country's economy.
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.