Türkiye sticks to record foreign exchange reserve building mode
The headquarters of the Central Bank of the Republic of Türkiye (CBRT), Ankara, Türkiye, July 28, 2022. (AA Photo)


Türkiye's foreign exchange reserves rose by almost $9.8 billion last week, official data showed Thursday, as the central bank continues to shore up its financial buffer at a record pace since the local elections.

The second consecutive weekly sharp increase comes amid increasing confidence in Türkiye's economic policies and foreign inflows, Vice President Cevdet Yılmaz and Treasury and Finance Minister Mehmet Şimşek said.

The Central Bank of the Republic of Türkiye's (CBRT) net international reserves reached $30.87 billion in the week through May 10, marking a cumulative recovery of $16.86 billion over the past two weeks, according to the weekly data.

Total reserves saw a $7.5 billion increase compared to the previous week, reaching $134.4 billion, the data showed. The strongest weekly surge since Aug. 27, 2021, was attributed to a $2.49 billion increase in gold reserves and a $5.06 billion rise in gross foreign exchange reserves.

That lifted the increase in total reserves over the past two weeks to $10.32 billion.

The resurgence comes amid concerted efforts by the CBRT to amass foreign currency, amid heightened foreign interest and diminishing foreign exchange demand.

Excluding swaps, the net reserves recovered to minus $23.6 billion last week, from minus $39 billion in the week through May 3. They hit a record low of minus $65.5 billion on March 29, just before the local elections.

The improvement in net international reserves, excluding swaps, over the past month and a half has reached $42 billion, Yılmaz and Şimşek said.

They both said the increase would contribute to Türkiye's ongoing efforts to tame stubbornly elevated infation.

"The increase in our reserves and growing foreign capital inflows will make a significant contribution to the disinflation process that we are determined to implement," Yılmaz said on social media platform X, formerly known as Twitter.

The annual inflation rate currently runs at nearly 70% and is expected to peak at 75%-76% in May before falling to 38% at year-end, according to the CBRT's forecast.

Following last year's presidential and parliamentary elections, Türkiye moved away from years of easing monetary policy. The central bank 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.

"We will continue to see the effects of our program, which we implement with determination, both in the real sector and financial markets," Yılmaz said.

In a post on X, Şimşek said, "The positive outcomes of our program and the strengthened financial stability, along with increased confidence, will significantly contribute to disinflation."

Both Yılmaz and Şimşek referred to the gradual decline in Türkiye's risk premium, which has dipped to the lowest level in four years.

The country's five-year credit default swaps (CDS) – a form of insurance for bondholders – fell by 435 basis points compared to May last year, reaching 268 basis points, the lowest since February 2020, Şimşek said.

Yılmaz also stressed what he said were record-level buying of Turkish bonds by foreign investors last week.

The net foreign exchange inflow through the stock and bond market reached approximately $6.4 billion from March 22 to May 10, said the vice president.