Turkiye to boost apex bank’s foreign reserves amid lira slide

Turkiye is intensifying efforts to boost foreign reserves in its central bank, the country’s finance minister has revealed.

Writing on Twitter, Mehmet Simsek said the bank’s net international reserves rose to a record $8.5 billion last week.

“The return to rational policies will continue gradually,” the minister wrote, adding: “We are accelerating our efforts to obtain additional foreign resources to our country in order to further strengthen the reserves.”

Earlier this week, the lira slid to a fresh record low against the US dollar after the Central Bank of Turkiye simplified rules governing lenders’ holdings and foreign deposits following its sharp interest rate hike last week.

The lira fell to 26.10 against the dollar on Tuesday, surpassing last week’s all-time low of 25.74.

The drop comes after Hafize Gaye Erka — the bank governor who took up the post at the beginning of June — raised rates by 650 basis points to 15 percent, a substantial tightening despite falling short of market expectations.

The bank’s policy committee said the tightening “will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved.”

The institution also began rolling back parts of the dozens of rules and regulations it had adopted since 2021 that left debt, credit and forex markets heavily state-managed and were meant to encourage lira holdings.

The relaxing of the rules is designed to free up markets and ensure stability, the bank said.

In April, in an attempt to promote and further protect savings, the central bank allowed other banks to issue short-term maturities for foreign-exchange-protected lira deposit accounts.

The bank will determine the maturities of these deposit accounts, which will only be enabled if there is demand for them.

With the introduction of this new rule, the apex bank would be able to disregard the three-month minimum maturity that had been formerly in use in the country.

The move aims to limit the use of foreign currency transactions in the country’s banking system.