The Turkish government's efforts to prevent foreign exchange rates from further increasing in the face of the election campaign have depleted the central bank's reserves.
According to the latest data, net reserves including swaps fell into negative figures for the first time in 21 years, according to the daily BirGün. As a result, the country’s economic administration, which had long relied on reserves as its sole weapon to stabilize exchange rates, has now exhausted its options.
After the presidential elections went to the second round, the government took several steps to prevent the demand for foreign currency, and reserves were used to prevent the exchange rate from rising. Based on data from the central bank, gross reserves declined by 3.5 billion dollars to 101.6 billion dollars during the week of May 15-19. Furthermore, the reserves witnessed a significant two-month decline, amounting to a 25 billion dollar decrease.
In the week of May 19, the bank's net reserves fell to -0.2 billion USD. Thus, net reserves moved into negative numbers for the first time in 21 years under the ruling Justice and Development Party (AKP). In the week of May 12, net international reserves were 2.33 billion dollars. It indicates a net international reserve loss of approximately 2.5 billion dollars in one week.
A critical level was also observed in net reserves excluding swaps. Net reserves excluding swaps were -60.3 billion dollars in the week of May 19. This figure was recorded as -57.8 billion dollars in the week before.
Recently, gold reserves have also been sacrificed to prevent the increase in exchange rates. In the week of May 19, gold reserves declined from 44.3 billion dollars to 42.8 billion dollars.
During the week of May 15-19, banks decided to require securities for cash advances and loans, fearing that the loans would increase the demand for foreign currency. When the system locked up due to a halt in usage, the decision was reversed. However, with the Banking Regulation and Supervision Agency (BDDK) instructions, the demand for foreign currency was tried to be prevented.
As a result of the government’s pressure on the banks to offer high-interest rates on the FX-protected lira deposit scheme, the volume of the FX accounts increased further as some savers started to unwind their FX accounts.
The FX accounts continued their upward momentum in the week of May 15-19, and a new record level was recorded. According to the BDDK data, there was an inflow of 51.4 billion liras to FX-protected deposits last week. With this inflow, the total size increased to 2.4 trillion liras.
The FX-protected deposits, which have been rising uninterruptedly since January, recorded record inflows ahead of the first round of elections on May 14. According to the BDDK’s latest data, 23.1 percent of total deposits in banks consisted of FX-protected deposits, while 40.1 percent were foreign currency deposits.