World Economy

Turkey Raises Ratio for FX Reserve Requirements

Turkey Raises Ratio for FX Reserve RequirementsTurkey Raises Ratio for FX Reserve Requirements

Turkey’s central bank increased the foreign-currency reserve ratios required of banks and financing companies, after a month in which the lira was among the world’s worst-performing emerging-markets currencies.

The revision announced today is intended to make sure institutions can meet foreign-exchange liabilities. It would add approximately $3.2 billion to the central bank’s foreign currency reserves, the bank said in a statement on its website. The average reserve requirement ratio for foreign currency, now 11.7 percent, will rise to 12.8 percent, Bloomberg quoted the report as saying.

Turkish central bank Governor Erdem Basci warned Dec. 10 in Ankara that the bank would take measures against excessive short-term foreign currency borrowing by Turkish banks. The International Monetary Fund had urged Turkey to raise reserve requirements for foreign-currency liabilities in a report on Dec. 5, saying that reducing bank incentives to fund themselves in foreign currency would limit the risk of a balance-of-payments crisis.

The changes were made “with a view to supporting financial stability and by taking into account the latest developments in global markets,” the bank said.

Turkey’s currency depreciated 5.2 percent last month against the dollar, making it the fourth-worst-performing emerging-market currency in the period.

The increase in reserve ratios is less than the amount suggested by the IMF, which had said Turkey could raise them to as much as 30 percent without “significant loss in profitability” for banks. Turkey should also consider steps to deter foreign currency lending, including higher capital requirements, the IMF said.

The revisions will take effect as of the calculation period dated Feb. 13, the bank said.

  Slips 4 Places

Turkey has slid four places in the Center for Economic and Business Research’s (CEBR) World Economic League Table (WELT), strengthening concerns that the deteriorating outlook of the economy could overshadow the country’s first term as the head of the world’s 20 most developed economies, Sunday’s Zaman reported.

European Union candidate country and NATO member Turkey was listed as having the world’s 17th-largest economy in 2013, but fell two steps to 19th place this year in WELT, a report that ranks countries by their gross domestic product (GDP).

Turkey’s “G-20 Priorities for 2015” document, signed by Prime Minister Ahmet Davutoglu, states that in 2015, the G-20 will focus its efforts on ensuring inclusive and robust growth through collective action.

After a year plagued by heavy political tensions and an assortment of global economic developments, Turkey dropped slightly in WELT, as the Netherlands and Saudi Arabia took the 17th and 18th places, respectively, pushing Turkey to the 19th spot.

Ali Babacan, the deputy prime minister heading Turkey’s G-20 presidency, said at the G-20 Sherpa Conference in Istanbul on Dec. 15: “We are going to be giving special importance to the implementation of our growth strategies. The G-20 members have committed to more than 1,000 reforms to ensure that the objective of collective growth is met.”