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The net borrowing goal of Turkish lira (TRY) 140.1bn ($18.9bn) outlined in the 2020 budget passed by parliament has been breached, while debt issuance has passed TRY154.1bn, daily Dunya reported.
Turkey’s budget deficit reached TRY139.1bn in July versus the 2020 target of TRY138.7bn. Extraordinary spending measures brought in to address the impact of the coronavirus (COVID-19) pandemic outbreak amount to more than TRY200bn. This has expanded the budget deficit to its record level.
The government will reportedly announce its medium-term economic programme for 2021-2023 in September.
The central bank transferred TRY55bn to the Treasury in January 2020. Total transfers from the central bank amounted to TRY90bn in 2019.
7.0 FX
The betting is open on the timing of Turkey’s ultimate collapse, Okan Muderrisoglu—who could be considered the voice of the palace administration in Ankara—suggested on July 28 in his column entitled “Even the river may sleep but spies in the market never do!” that there are those lurking in the market working to assumptions that the Turkish economy can be “infected” during autumn. The possibility of Joe Biden wining the US presidential election on November 3 led Muderrisoglu’s list of crucial matters.
On July 30, Muderrisoglu warned in his column, entitled “The wisdom of the state will defeat the devious trick”, that those who were trying hard to create a “perfect storm” in political and economic turbulence should be headed off.
With the foreign market players out of the exits, USD demand in exchange for TRY is now driven by domestic demand and the current account deficit.
Although they amount to no more than mere bank records on FX-denominated deposits taken in by local lenders (thanks to the huge amount of central bank swaps), data on Turkish residents’ FX holdings is seen as a gauge of FX demand among local holders of savings.
Apart from the Argentinian peso, the Turkish lira is the only major emerging market currency to have fallen since the dollar peaked on March 23, unable to catch a break from the prospect of looser financial conditions that a weaker US currency affords EM economies, Bloomberg noted.
Turkey’s net reserves should have risen by $93bn since the beginning of 2019 to the end of June. However, they have declined $0.9bn, Haluk Burumcekci of Burumcekci Consulting wrote on July 29 in his daily bulletin.
This $94bn, a discrepancy, is thought to have been sold via state lenders to support the embattled TRY.
Calculations suggest that Turkey burnt through $6bn of reserves in June, bringing total interventions in the lira market to $61bn in H1 that followed $33bn in 2019.
In April and May this year, about $11bn worth of reserves were burnt through each month.
Additionally, Turkish state lenders’ net FX deficit passed $10bn as of July 24,
37 TURKEY Country Report September 2020 www.intellinews.com
