The decrease in the CBRT’s net reserves continued last week. According to economists’ calculations, in the week ending February 23, the Central Bank’s gross reserves decreased by $2.4 billion and net international reserves decreased by $5.9 billion.
Even though the Central Bank bought foreign currency in December, it could not avoid losing reserves in the first two months of this year. According to bankers’ calculations, net international reserves decreased by $5.9 billion last week, and $4.1 billion of this decline occurred in the form of foreign exchange outflows.
According to bankers’ calculations, the Central Bank sold $4 billion in foreign currency from the beginning of the month to the end of the week of February 23, although most of it was to cover the returns of exchange rate-protected deposits. According to the Central Bank’s analytical balance sheet, net reserves decreased by $5.9 billion in the week of February 23, and $4.1 billion of this decrease occurred as foreign exchange sales. It is calculated that gross foreign exchange reserves decreased by $2.4 billion to $131.8 billion. Thus, while total reserves have been melting continuously for 6 weeks, the dollar and Euro basket exchange rate increased by approximately 3% against TL throughout February. Bankers pointed out that domestic residents’ demand for foreign currency continues.
According to the news of Sebnem Turhan from Ekonomim, according to the calculations made by banking sector sources, although there has been a downward trend in foreign exchange reserve indicators in recent weeks, there is still a significant improvement compared to the middle of last year. However, when compared to short-term external debt stock and import data, foreign exchange reserves still remain below levels that can be considered sufficient according to international norms.
$2.4 BILLION DECLINE IN TOTAL RESERVES
The Central Bank will announce data on the status of weekly foreign exchange reserves tomorrow. However, bankers make calculations from the Central Bank’s daily analytical balance sheet and other data it announces. According to the calculations made by bankers based on these data, foreign assets decreased by $2.4 billion in the week of February 23. Total foreign exchange reserves experienced a similar meltdown, falling from $134.2 billion in the week of February 16 to $131.8 billion . Thus, the continuous meltdown in total reserves reached the 6th week. According to the analysis made by bankers, the increase of $3.5 billion in the amount of foreign currency held by banks within the framework of required reserves and collateral deposits at the CBRT last week had a positive impact on the total reserves.
It was calculated that net international reserves decreased by $5.9 billion to $22.6 billion in the week of February 23. Banking industry sources analyzed that net reserves excluding swaps decreased by $4.1 billion compared to the week of February 16, decreasing by $46 billion, pointing out that total reserves decreased compared to $145.5 billion on December 22, 2023, net international reserves decreased to $40.1 billion, and net reserves excluding swaps decreased compared to $-36.4 billion on the same date. Since December 22, 2023, there has been a meltdown of $13.65 billion in total reserves, approximately $10 billion in net reserves excluding swaps, and $17.5 billion in net international reserves. Although there was a decline in reserves, there was also a significant improvement compared to the levels at the end of May last year. Total reserves, which were at $98.5 billion at the end of May 2023, are $33.34 billion, net international reserves are $27 billion, and net reserves excluding swaps are $15.2 billion higher.
DECREASE IN NET INTERNATIONAL RESERVES IS $5.9 BILLION
Banking sector experts emphasized that the decrease of $1.8 billion in the swap volume with domestic banks, which is considered in the net reserve, in the week of February 23 had a negative impact on the net reserve last week, and noted that the increase in gold prices led to an increase of $0.3 billion in the net reserve. Stating that public foreign exchange deposits decreased by $0.3 billion in the week of February 23, experts pointed out that these transactions caused the net reserve to decrease by $1.8 billion last week. The majority of the $4.1 billion decline, excluding $1.8 billion from the $5.9 billion meltdown, occurred due to export foreign currency purchases, rediscount loan payments, foreign currency sales to public institutions and the market, and warehouse/swap transactions with foreign banks. This reveals a foreign exchange outflow of $4.1 billion. According to the calculations of banking sector analysts, after making a net foreign exchange purchase of $13.1 billion in December 2023 with the support of foreign fund inflows, the Central Bank sold $6.1 billion in foreign currency in January 2024 and $4 billion in the period from the beginning of February to February 23. Experts pointed out that these sales were largely due to meeting the banking sector’s demand for exchange rate-protected deposit returns.
WHAT IS THE QUALIFICATION LEVEL OF FOREIGN EXCHANGE RESERVES?
Again, according to bankers’ calculations, the Central Bank’s total foreign exchange open position, including KKM, remained close to horizontal after decreasing from $214.1 billion in June 2023 to $138.8 billion at the end of 2023, and as of February 23, it remained at a similar level to the end of the year. Banking experts pointed out that this level of foreign exchange reserves is still below the levels that can be considered sufficient according to international norms, and reminded that the generally accepted rule is that the foreign exchange reserve should cover 6 months of imports and all foreign debts due in the next year. Analysts noted that as of December, imports for the last 6 months (seasonally adjusted) were at the level of $177.3 billion, and as of December, the amount of foreign debt that will mature in the next year was $226.6 billion and said that when the TL denomination and the portion provided by domestic institutions to their foreign branches are excluded, this amount is $198.7 billion. For this reason, analysts stated that the adequacy level for Turkiye’s foreign exchange reserves seems to be around $180-$200 billion, but this may change depending on the developments in the economy.
Source: Patronlardunyasi / Prepared by Irem Yildiz