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bne May 2023 Companies & Markets I 17
Turkey’s central bank collecting physical dollars at Grand Bazaar
Akin Nazli in Belgrade
The Grand Bazaar in Istanbul is back as the Turkish financial capital's operational centre for FX transactions. It's been reinstated given consequences of Turkey's tight measures on FX transactions that take the form of macroprudential measures and non-capital controls and generate hard currency supply problems, local business daily Ekonomi reported on April 10.
From private companies to banks to citizens to public institutions, all economic actors are turning up at the Bazaar to meet FX needs.
Even the central bank has joined the institutions meeting their FX needs at the Bazaar. Each day it brings Turkish lira (TRY) 5bn to the Bazaar and collects around $260mn in exchange.
According to the central bank’s weekly balance sheet (A2. Foreign Banknotes FX (Thousand TRY) / USD Buying Rate), the national lender's physical FX stock rose to $9.6bn at end-2022 from $4.3bn at end-2021. The figure stood at $8.5bn at end-Q1.
The central bank carries out its transactions with an unnamed exchange office. The office subcontracts transactions to a total of four to five bureaux.
The central bank directly collects FX with the use of “wheeled anchor chests”. The chests are carried by interior ministry vehicles. Such an extraordinary operation has never been seen before.
The “wheeled chest transactions” are also carried out by some other institutions. Reportedly, something of a traffic jam is regularly caused by the chests turning up at the Bazaar.
Even if a transaction is for a small amount of dollars, a great number of lira banknotes are required to secure it due to the current exchange rate. Thus, logistics companies are hired to carry out operations using the chests.
“Even if a transaction is for a small amount of dollars, a great number of lira banknotes are required so logistics companies are hired to carry out operations using the chests”
As a result of the high demand, the spread between the FX rates on the interbank market and the Bazaar have boomed.
As of April 12, the USD/TRY was hovering in the 19.30s, while buying prices at the Bazaar were in the 19.60s versus selling prices in the 19.70s.
The digital USD/TRY has lately taken off on another record- breaking spree. The latest record, set on April 6, is TRY 19.45. From early March, the pair shot through barriers in the 18.80s
Unidentified FX inflows under the net errors and omissions account hit a record $27bn in 2022
Source: Türkiye Cumhuriyet Merkez Bankası
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