Data recently showed that the Central Bank of the Republic of Türkiye‘s net foreign reserves fell by $1.03 billion reaching $34.78 billion on December 1. This is after the reserves reached their highest level since March 2020 the previous week.
Reserve’s recovery
Since early June, just after the presidential election, foreign reserves have begun to recover. That is after they fell to about $5.7 billion, the lowest level recorded since the beginning of data publication in 2002.
In addition, the exchange rate today, Friday, reached 28.982 liras for each dollar. As of early March 2020, net foreign reserves amounted to $37.11 billion.
Total reserves
Five banks recently revealed that the central bank’s total reserves had risen to a record high of more than $140 billion. Moreover, they will continue this upward trend after the bank adopted more stringent policies after the May elections. These bankers also expected a $1 billion decline in net foreign reserves.
The rising reserves combined with increased interest rates that have reached 3,150 basis points since June signal Turkey’s shift away from unconventional policymaking. Moreover, the country abandoned the practice of using reserves to directly support the Turkish currency. It has also sought to dismantle strict financial market regulations to promote the policy shift.
Read: Türkiye’s Central Bank ramps up interest rates by another 500 points
Foreign investment
Years of interest rate cuts, rising inflation, and draining foreign currency reserves have sent foreign investors fleeing the major emerging market economy. However, the recent shift has brought renewed interest.
Foreign investors hold less than 1 percent of lira-denominated bonds. This recorded a decrease from 10 percent in 2019 and 20 percent in 2015, according to official data. In addition, investors are concerned that Erdogan may dismiss the head of the central bank and the treasury minister again and return to unconventional policies.
For more news on the economy, click here.
