ANKARA: The Turkish central bank’s gross total reserves are expected to have fallen around $3.5 billion last week, bankers’ calculations show, continuing to dwindle after dropping $9 billion in the week before the May 14 landmark elections.
The bank’s net reserves, meanwhile, likely dipped into negative territory last week for the first time since 2002, the calculations of five bankers showed on Tuesday.
In the week ahead of the presidential and parliamentary vote, demand for foreign currency was at record highs amid concerns among companies and individuals that the lira would weaken afterwards, the bankers said, requesting anonymity.
Separately, gold reserves have declined by some $9 billion to $44.3 billion since the end of March as the central bank sold its reserves to meet domestic demand after gold imports were restricted.
The bankers said the total drop may have reached $10 billion as of last week.
The central bank’s depleted FX buffer reflects authorities’ efforts to stabilise the lira currency in recent years and ahead of elections. It also reflects fallout from President Tayyip Erdogan’s unorthodox economic programme of interest rate cuts in the face of high inflation.
Turkey’s net FX reserves hit 21-year low of $2.3bn before vote
“I think they are at the bottom of the barrel,” Francesc Balcells, CIO of Emerging Markets Debt at FIM Partners, said of the rundown of the balance sheet.
“They have gold reserves that they’re trying to liquefy now. But other than that they’re running very, very thin in terms of liquid assets,” he said.
After Erdogan fell just short of the 50% needed to win outright on May 14, he faces a runoff vote on May 28 against opposition challenger Kemal Kilicdaroglu who has pledged to return to economic orthodoxy to address a cost-of-living crisis.
The central bank’s total gross reserves, which is sum of its foreign currency and gold reserves, decreased $9 billion in the week to May 12 to $105.13 billion, the lowest since July 2022.
Last week, the fall in gross reserves amounted to between $3.3 billion and $3.7 billion, according to the bankers. On average they see total reserves at $101.5 billion as of May 18.
The fall in net reserves amounted to between $2.1 billion and $2.7 billion last week, they said. On average they see total net FX reserves at negative $0.2 billion as of May 18.
The central bank will publish official data on Thursday.
In the year to May 12, official data shows gross reserves have plunged by $23.6 billion, while the central bank also relaunched gold sales.
The year-to-date decline surpassed $27 billion last week, based on the calculations.
The central bank has $100 billion over 12 months based on Turkey’s exports last year of $250 billion additional to its reserves.
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