Central Bank’s Net Reserves Turn Positive for the First Time in Four Years

Central Bank’s Net Reserves Excluding Swaps Reach Positive Territory

As of Friday, May 31, the Central Bank of Turkiye’s net reserves, excluding swaps, have turned positive, reaching $1.5 billion. This marks the first time in over four years that the net reserves have entered positive territory. Since March 29, 2024, the net reserves, excluding swaps, have improved by $66.5 billion, culminating in a positive balance on May 31.

Before the elections, the net reserves, excluding swaps, had plummeted to -$65 billion. However, there has been a swift recovery in net reserves following the elections.

This significant turnaround marks the first time net reserves, excluding swaps, have been in the positive since March 2020.

During this period, gross reserves increased from $123.1 billion to $143.6 billion.

Experts reiterate that the favorable trend in transitioning to the Turkish Lira and the influx of foreign capital will continue to support the rise in international reserves.

What Are Net Reserves Excluding Swaps?

Net reserves excluding swaps refer to the amount of reserves a central bank holds after deducting the borrowings obtained through swap transactions. This measure provides a clearer picture of the central bank’s actual reserve capacity without the influence of temporary swap agreements.

Why Are Swap Agreements Made?

Central banks engage in swap agreements to boost their foreign exchange reserves and stabilize exchange rates. These agreements involve exchanging currencies with another country’s central bank for a specified period at a predetermined interest rate.

Why Are Net Reserves Excluding Swaps Important?

Reserves obtained through swaps are essentially debts that need to be repaid, so they are subtracted when calculating net reserves excluding swaps. This metric is crucial for understanding how much of a country’s foreign exchange reserves are truly available and the central bank’s capability to intervene in foreign exchange markets.

Source: NTV / Prepared by Irem Yildiz

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