Turkey is spending money it doesn’t have


(The author is a columnist for Reuters Breakingviews. The opinions expressed are their own.)

LONDON (Reuters Breakingviews) – Minutes before President Tayyip Erdogan delivers another speech renouncing high interest rates, Turkey’s central bank said https://www.tcmb.gov.tr/wps/wcm/connect / EN / TCMB + EN / Main + Menu / Announcements / Press + Releases / 2021 / ANO2021-54 he was selling dollars to support the lire. The bank has $ 25 billion in net reserves in November, up from $ 28 billion the month before. But that still includes $ 48 billion in local bank swaps, without which reserves are firmly in negative territory.

This is a mistaken attempt to back Erdogan’s ultra-accommodative monetary policy, which has caused the pound to fall more than 40% against the dollar this year. Supporting the currency could slow Turkey’s descent into hyperinflation, but the country’s pot of dollars may run out. The bank sold some $ 128 billion to stabilize the pound in 2019-2020 and had to raise rates again. When net reserves stood at $ 28 billion in August 2020, it took just five months to bring them down to $ 11 billion – the lowest since at least 2003. The more reserves decline, the more another depreciation is likely. Ergonomics is an expensive business. (By Dasha Afanasieva)

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(Edited by Neil Unmack and Oliver Taslic)

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