Turkey's repeated attempts to shore up the lira over the past year have lef...
LONDON - Turkey’s repeated attempts to shore up the lira over the past year have left it perilously low on hard cash reserves as domestic households scramble to shift their savings to dollars and companies struggle to refinance their overseas debts.
Data released last week showed gross FX reserves at Turkey’s central bank dropped by some $3 billion to $73.78 billion in the week to March 15. Meanwhile total forex deposits and funds, including precious metals, of Turkish local individuals hit a record high of $105.74 billion. “It is a signal that the central bank is supplying part of the economy with FX reserves and not through the market,” said Ulrich Leuchtman, head of FX & EM research at Commerzbank in Frankfurt.
The picture looks somewhat different in calculations by the Institute of International Finance. The IIF estimated some $75 billion issued by government, banks and corporates is maturing in 2019, of which $17 billion is short-term, $59 billion medium to longer-term, and the rest made up of trade finance and non-resident deposits.
Countless emerging market crises have shown over the decades that it is not necessarily the withdrawal of foreign investors from a market but the drying up of central bank reserves and a flight of local households and businesses from a currency that are instrumental in its collapse.“The concern has been dollarisation: It is not really foreigners leading the way, it is all about locals,” said Tim Ash, senior emerging markets strategist at BlueBay Asset Management.
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