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bne:FX
Erdogan lashes out at FT over report on Turkish central bank’s ‘enhanced’ FX reserves
bne IntelliNews
Turkish President Recep Tayyip Erdogan has lashed out at the Financial Times after it reported that the Central Bank had bolstered its foreign currency reserves with short-term borrowed money, leading to concerns that Turkey might not be able to defend itself in the event of a rerun of the currency crisis it suffered last summer.
The populist Erdogan also accused the FT and other western media of falsely portraying the Turkish economy as “collapsed, finished”.
Analysts have for weeks been concerned about the unclear reasons behind movements in the central bank’s forex reserves, which became particularly pronounced as the regulator attempted to defend the Turkish lira (TRY) prior to the March 31 local elections that saw recession-hit voters in Ankara and Istanbul deal Erdogan his first major electoral reverses since he came to power 17 years ago.
After the poll defeats, Turkish finance minister and Erdogan son-in-law Berat Albayrak tried to reassure investors during presentations in Ankara and Washington that Turkey was preparing to move ahead with an effective economic reform plan, but his audiences were left rather unimpressed at his programme’s lack of detail and scale – reports that Albayrak’s presentations went down badly led to a slew of attacks in Erdogan-loyalist media in Turkey on Western publications.
There is also the difficulty that many analysts based in Turkey have become fearful of speaking out about the realities of Turkey’s economic situation. The regime recently launched
a probe into JPMorgan after it advised clients to sell the lira. After the banking watchdog BDDK announced the investiga- tion, Erdogan warned analysts at investment banks: “We know the identities of all of you. We know what you are doing.”
Erdogan made his remarks about the FT while addressing the Confederation of Public Servants Trade Unions (MEMUR-SEN) on April 18.
Lira weakest in six months
The TRY weakened around 2% against the dollar following the FT report on April 17, although some of its decline was attrib- utable to a strengthening of the USD. At its weakest point in morning trading, the TRY sank to 5.8459, the worst rate seen since last October.
Erdogan, while attacking the newspaper, insisted that the Turkish economy "is standing strong".
He then claimed Turkey was being attacked because it was speaking out against injustices, including about refugees. "Oh Financial Times! What do you know about Turkey which hosts four million refugees? How many refugees are there
in your country?" he said, adding: “The Financial Times had written this or that! No matter what you write, the situation of my country is clear. They will get accustomed to it. They will accept Turkey’s strength.”
In its report, the daily stated: “Reported net foreign reserves held by the central bank stood at $28.1bn in early April – a sum that investors already believed was inadequate because of Turkey’s heavy need for dollars to cover debt and foreign trade. But calculations by the Financial Times suggest that this total has been enhanced by an unusual surge in the use of short-term borrowing, or swaps, since March 25. Stripping those swaps out, the total is less than $16bn.”
In a written response to questions from the Financial Times, the central bank acknowledged publicly for the first time that its use of currency swaps “may impact reserve figures”, but said its method for accounting for them was in “full compli- ance with international norms”.
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