Turkey has spent more than $ 7 billion to support the pound in December

The country’s central bank has announced a return to controversial foreign exchange policy to support the pound in December, as President Recep Tayyip Erdogan’s insistence on lowering interest rates despite rising inflation has pushed the currency to a record low. .

Data released later this week showed that during the five inventions officially announced last month, the bank consumed a total of $ 7.3 billion.

The central bank has spent billions of dollars on its foreign exchange reserves in undeclared interventions carried out through Turkish state-owned banks, analysts said. These sales intensified after an emergency package announced late last month by Erdogan aimed at boosting savings and supporting the pound, according to market participants.

The pound recovered sharply after Erdogan’s plans were unveiled, falling from a record low of 18.36 against the US dollar to about 11 pounds / dollar by December 23rd. However, it has since dropped to almost £ 14 / dollar.

Goldman Sachs warned this week that the nation’s reserves had “significantly dropped” in the last month of 2021, by about $ 15 billion to $ 111 billion.

This drop is partly due to the sale of foreign currency to Botas, the national energy importer, which totaled $ 3.4 billion last month, according to new data released on Friday.

But Goldman Sachs said the numbers also suggest that “interventions may have taken place [valutare] to support the pound “around the date of Erdogan ‘s announcement.

The bank said net reserves, excluding money borrowed from Turkish banks and other global central banks, were minus $ 66 billion.

Erdogan, a lifelong opponent of high interest rates, has ordered the central bank to cut the monetary policy interest rate by 5 percentage points to 14% in the last four months of 2021, despite warnings about the impact on inflation growing country.

Taking into account inflation, which was at an official rate of 36% in December, interest rate cuts have pushed the real interest rate in the country to minus 22%. This discouraged investors from saving in pounds and put huge pressure on the currency, which lost about 45% of its value against the dollar last year.

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