Turkey’s state banks sold almost $44 billion of hard currency in the first four months of 2020 and up to $77 billion since the beginning of 2019 to support the lira, according to central bank data supported by the calculations of four bankers.
The calculations and estimates are based on the central bank’s latest data. The bankers, who requested anonymity due to the sensitivity of the matter, previously estimated state banks sold at least $32 billion as of March. Meanwhile, the central bank declined to comment.
According to two of the bankers, more selling took place in May to boost the Turkish currency and offset an outflow of funds amid the coronavirus pandemic, bringing total sales this year to more than $50 billion.
The FX interventions by state lenders have heightened investor concerns over a drop in Turkey’s foreign currency buffer as its economy tips into a sharp downturn, Reuters reported.
The central bank’s net FX reserves have fallen to as low as $26 billion this month, from $40 billion at the start of 2020.
Its governor, Murat Uysal, said last month that fluctuations in reserves are normal and temporary in such periods of stress.
Finance Minister Berat Albayrak has said the bank may intervene to reduce volatility in the currency.
The lira has outperformed most emerging market (EM) peers this year, even while it is down 15% against the dollar and hit a record low in May.
Adding to market concerns, Turkey’s external debt obligations are nearly $170 billion over the next 12 months.
Kerim Rota, a founding member of Turkey’s new Future Party, which opposes President Tayyip Erdogan’s ruling AK Party, said he calculated interventions of more than $11 billion in April alone, and $77 billion in the last 16 months.
These “backdoor” interventions diminish Turkey’s transparency and reputation, and turn away foreign investors, Rota, a former banker, said on Twitter.
Separate central bank data showed that official reserves fell by $16.6 billion in March, reflecting a steady outflow of foreign funds in the last few months. Foreigners’ share of Turkish bonds is at near record lows.
