Heading: Turkiye’s Efforts to Boost Foreign Reserves in Central Bank
Turkiye’s finance minister, Mehmet Simsek, has announced that the country is intensifying its efforts to boost foreign reserves in its central bank. In a tweet, Simsek revealed that the bank’s net international reserves reached a record $8.5 billion last week. This move is part of Turkiye’s strategy to strengthen its reserves and return to rational policies.
Heading: Lira Slides to Record Low Against US Dollar
The lira, Turkiye’s currency, recently hit a fresh record low against the US dollar. This drop came after the Central Bank of Turkiye simplified rules governing lenders’ holdings and foreign deposits following a significant interest rate hike. The lira fell to 26.10 against the dollar, surpassing last week’s all-time low of 25.74.
Heading: Central Bank Raises Interest Rates to Tackle Inflation
Hafize Gaye Erka, the governor of the Central Bank of Turkiye, recently raised interest rates by 650 basis points to 15 percent. This substantial tightening was aimed at tackling inflation and stabilizing the economy. While the rate hike fell short of market expectations, the bank’s policy committee stated that further tightening would be implemented until a significant improvement in the inflation outlook is achieved.
Heading: Relaxing Rules to Ensure Market Stability
In an effort to promote market stability, the Central Bank of Turkiye has begun rolling back certain rules and regulations that heavily state-managed debt, credit, and forex markets. These rules were implemented in 2021 to encourage lira holdings but ended up hindering market freedom. The bank believes that by relaxing these rules, markets will become more dynamic and stable.
Heading: Promoting Savings through Short-Term Maturities
To promote and protect savings, the central bank has allowed other banks to issue short-term maturities for foreign-exchange-protected lira deposit accounts. This new rule allows the bank to disregard the previous three-month minimum maturity requirement. The aim is to limit foreign currency transactions in the country’s banking system and encourage the use of the lira.
Heading: Conclusion
Turkiye is taking steps to strengthen its foreign reserves in the central bank. The recent record increase in net international reserves is a positive sign for the country’s economy. The central bank’s decision to raise interest rates and relax certain rules is aimed at tackling inflation and promoting market stability. By promoting savings through short-term maturities, Turkiye hopes to limit foreign currency transactions and encourage the use of the lira. These efforts are part of a broader strategy to strengthen the country’s economy and return to rational policies.