Turkey’s Central Bank reserves fall by $3.3B after 15 weeks of consecutive increase

Duvar English

Turkey's Central Bank's gross reserves fell by $2.2 billion and net reserves by $3.4 billion as of Sept. 29, according to the Bank’s data.

Gross foreign exchange reserves, which stood at $83.8 billion in the previous week, have decreased to $81.5 billion. Additionally, gold reserves have dipped from $41.7 billion to $40.6 billion, resulting in an overall decrease in total reserves from $125.5 billion to $122.2 billion.

Total reserves recorded the longest increase record in the history of the bank’s data, which started in 1987, in Sep. 22. As of Sep. 29, 15 weeks of consecutive increase ended. 

Net international reserves, which were 24.3 billion dollars in the previous week, decreased to 20.6 billion dollars as well.

The bank’s FX reserves hit a historic low on June 2 due to policies including the use of reserves to protect the value of the Turkish lira ahead of the general elections in May. The Central Bank's reserves had fallen to minus 5.7 billion dollar in early June which was the lowest level since 2002.

Turkey's Central Bank has sold approximately 199 billion dollars in foreign currency from December 2021 to the end of May 2023, as part of their backdoor interventions aimed at maintaining stable exchange rates.

The government made a sharp U-turn in policies with the new economic management appointed after the elections. 

The central bank administration, led by Hafize Gaye Erkan, applied orthodox economic methods and has been raising interest rates after a long time. The bank has raised the weekly repo rate by a total of 2,150 points since June.

The bank on Sept. 21 raised the policy rate by 500 basis points to 30 percent, in line with market expectations.

The bank also started to withdraw from its FX-protected lira deposit accounts scheme (KKM), which became a major burden on reserves.

According to the weekly bulletin of the Banking Regulation and Supervision Agency (BRSA), the KKM accounts decreased from 3.304 trillion liras ($119.6B) to 3.303 trillion liras ($119.58B).

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