Turkey may draw on 40 billion liras of central bank reserves – Reuters

Turkey’s government plans to draw on as much as 40 billion liras ($6.5 billion) of reserves held by the central bank because the budget deficit has deteriorated more than expected, Reuters reported citing three unidentified economy officials.

The Treasury and Finance Ministry is working on legislation to transfer the central bank’s legal reserves, which are set aside from profits in case of extraordinary circumstances, said Orhan Çoşkun, a reporter for Reuters. The officials asked to remain anonymous, he said.

It would be the second time this year that the government withdrew cash from the central bank to bolster its finances, which have deteriorated because of local elections on March 31, a currency crisis last year and a resultant economic recession. In January, it transferred 37 billion liras to the budget from the central bank’s 2018 profits three months earlier than planned.

One of the sources said a draft law allowing the government to draw on the capital would reach parliament “soon”, Çoşkun said in the report. The central bank held 27.6 billion liras of the reserves at the end of 2018 and has accumulated the rest since then, he said.

It was unclear exactly how much of the reserves would be transferred, Çoşkun said, adding that the central bank and Treasury could not immediately be reached for comment on the alleged plan.  

The alleged plan comes ahead of a June 23 rerun of the March 31 elections for mayor of Istanbul. The vote was won by an opposition candidate but cancelled by the election authority under government pressure.

Turkey’s budget registered a surplus in January, thanks to the central bank cash. It has since slumped into a deficit, which reached more than 36 billion liras in the first quarter, as tax revenue contracted sharply and spending surged. That figure equates to 45 percent of the government’s deficit target for the whole year.

Treasury and Finance Minister Berat Albayrak, the son-in-law of President Recep Tayyip Erdoğan, says the government is cutting costs and demonstrating financial discipline.