Türkiye’s foreign exchange reserves are estimated to have risen by $3 billion last week, with net reserves excluding swaps, surging $9.5 billion, according to preliminary figures, as the central bank continues to accumulate hard currency to shore up its financial buffer.
The Central Bank of the Republic of Türkiye's (CBRT) net international reserves, excluding swaps, are forecast to have recovered to minus $14.1 billion in the week through May 17, according to bankers.
They said that net reserves, excluding swaps, have risen by about $51.3 billion in seven weeks since the March 31 local elections.
They hit a record low of minus $65.5 billion on March 29, and they recovered to minus $23.6 billion in the week through May 10, according to central bank data.
The resurgence comes amid concerted efforts by the CBRT to amass foreign currency amid heightened foreign interest and diminishing foreign exchange demand.
Hakan Kara, a Bilkent University professor and former chief economist at the central bank, said "there is no precedent" for this foreign exchange accumulation "in our history."
Kara attributed the surge to foreigners selling foreign currency, buying Turkis lira assets, and citizens converting a portion of their hard currency deposits to lira.
In a post on social media platform X, formerly Twitter, he also cited companies borrowing in foreign exchange and converting some of it to lira.
The central bank's total reserves are estimated to have seen a $4.5 billion increase last week, reaching $139 billion, according to bankers' calculations.
The $7.5 billion increase in the week through May 10 marked the strongest weekly surge since Aug. 27, 2021.
The central bank's net international reserves rose to around $34 billion, bankers said. It would mark a cumulative recovery of some $19.86 billion over the past three weeks alone.
Official data last week showed that the net international reserves surged some $10 billion to $30.87 billion in the week to May 10, their highest level since the beginning of the year.
'Unprecedented' scale, speed
Treasury and Finance Minister Mehmet Şimşek on Monday cited high foreign demand for Turkish lira assets and said the central bank had accumulated reserves "at a scale and speed unprecedented in history."
Şimşek said the lira would have appreciated "enormously in nominal terms" if the central bank had not accumulated foreign currency.
He stressed that steep currency gains would bring risks.
"We do not foresee excessive appreciation of the lira. All sorts of excess are dangerous," Şimşek told an interview with public broadcaster TRT Haber.
Şimşek said the currency could have strengthened to below 30 without central bank action.
The lira changed a little as of 1:50 p.m. in Istanbul, trading at 32.19 per U.S. dollar.
It has been relatively stable this year after weakening almost 40% against the dollar last year. Last week, it registered its longest winning streak since 2021.
Şimşek mentioned that Turkish residents have sold $12 billion and converted it into lira since the beginning of April.
The minister also said that the government would evaluate taking steps to ease offshore currency swap regulations.
Following last year's presidential and parliamentary elections, Türkiye moved away from years of loose monetary policy. The CBRT embarked on an aggressive rate hike cycle, raising its benchmark policy rate by 4,150 basis points to 50% since last June.
The government has endorsed an economic program centered around taming inflation, rebuilding foreign exchange reserves and curbing current account and budget deficits.