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support the central bank’s net reserves via swap auctions. However, nobody’s feeling the heat because 95% of Turkey’s media are ‘responsible patriots’ and bluntly reject all probing questions on the small matter of what would happen if huge numbers of people suddenly said they would like to withdraw their FX deposits from the local banks. Nervous deposit holders have since last summer’s currency crisis been looking for answers in the Turkish media as to whether their dollars are in safe hands, but all they’re told is essentially “It’s the same all over the world, all banking systems everywhere would fail if people didn’t trust their country’s banks”.
Banning the unpatriotic. But of course, where Turkey is concerned, if everyone started running to the banks, Erdogan would simply ban the attempt at a mass withdrawal before they were out the door. No doubt a few of these unpatriotic citizens could be hauled up on some instructive financial terrorism charges, but those doing the arresting would have to be selective—Turkey’s prisons are fit to burst by now, there’s not enough room to jail all FX deposit holders (terrorism charges have for years been all the rage for the Erdogan regime, they’re a catch-all for enemies left, right and centre, with even a Turkish basketball star in the US having to curtail his international match travel plans). If folk still don’t grasp what’s good for them, an outing for the pepper spray fuzz and a few rubber bullets might settle the issue. In fact, and I kid you not, some people are already in Turkish jails on financial terrorism charges after making claims on social media that their government is more than capable of seizing FX deposits placed with local lenders. Don’t be shy, ask yourself if Erdogan is by now running a full-blown banana republic. There are some impeccable rebuttals on offer—“Well, it’s the case in any country” or “All governments do the same” spring to mind—but, beware, normalising this kind of thing may catch up with ‘yours truly’ one of these days.
Turkish central bank yanks $4.2bn from market by hiking FX reserve requirement ratios. The Turkish central bank has increased its reserve requirement ratios for FX deposits by 200bp for all maturities to support financial stability, it said on May 27 in a written statement. The effect of the move will be the withdrawal of $4.2bn of forex liquidity from the market in favour of boosting the central bank’s coffers. Markets are nervous that the regulator is scrambling to have the ammunition to defend the battered Turkish lira (TRY) ahead of the controversial Istanbul election revote, scheduled for June 23, which will be seen as a key test of the durability of the Erdogan administration. On May 9, the central bank employed previous changes in its reserve requirement mechanism that resulted in a net withdrawal of $200mn and TRY7.2bn from the market. It also brought in a new swap on May 9 that allows it to bolster its international reserves by borrowing gold from commercial lenders. The reserve requirement ratio for FX deposits with maturities of up to 1-year rose to 13% as of May 3 from 12% while the ratio for maturities longer than one-year increased to 9% from 8%, according to central bank data. Despite the latest central bank move, the Turkish lira (TRY) was down by 0.47% d/d against the dollar to 6.0530 as of 16:10 local time on May 27.
5.3 FDI
TURKEY -FDI
2013
2014
2015
2016
2017
2018
FDI Net (BoP)
-9,927
-6,287
-14,178
-10,812
-8,845
-9,336
FDI net inflows (BoP)
13,563
13,337
19,274
13,950
11,546
12,984
FDI net inflows (% of GDP)
1.43
1.43
2.24
1.62
1.36
1.69
FDI net outflows (% of GDP)
0.38
0.75
0.59
0.36
0.32
0.48
41 TURKEY Country Report June 2019 www.intellinews.com