Turkey’s Central Bank back to square one

CBRT’s net foreign exchange reserves excluding swaps fell sharply in the week of March 8. Thus, net reserves fell to -53.9 billion dollars, down to the level before the new administration.

While the Central Bank pursued policies to increase reserves after the new management took office, net reserves excluding swaps fell to a negative $53.9 billion in the week of March 8, below the negative $51.8 billion level on June 23, 2023. Between December 22 and March 8, there was a reserve loss of 17.5 billion dollars.


The loss in the Central Bank’s reserves accelerated as foreign investors’ fled TL assets and locals demand for foreign currency increased ahead of the March 31 local elections. The Central Bank’s net reserves excluding swaps were -51.8 billion dollars in June 2023 when the new administration of the bank made its first rate hike. The shortage narrowed down -36.4 billion dollars in the week of December 22 as the CBRT kept raising the policy rate. 

However, the increasing demand for foreign currency by domestic and foreigners after December 22 caused the net reserves excluding swaps to fall to -53.9 billion dollars on March 8, and a total of 17.5 billion dollars was spent between December 22 and March 8.


Economists calculated that the Central Bank accumulated $20.3 billion in reserves between November 10 and December 22, but spent $17.5 billion between December 22 and March 08. The end of the hiking cycle amidst the rising inflation added to the fears of a post-election reversal in current orthodox polices fueled hard currency demand.

Foreign investors and residents sold TL assets in the week ending March 8. According to Central Bank data, foreign investors made net sales of 552.4 million dollars in stocks and government domestic debt securities last week, while residents’ foreign currency deposits increased by 3.2 billion dollars in 1 week, adjusted for the parity effect.