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Turkey’s ‘peg-legged’ foreign currency reserves

Turkey’s central bank appears increasingly fragile, with more than 60% of its reserves secured through swap deals.
Turkish lira banknotes are pictured at a bank in the town of Sarmada in Syria's northwestern Idlib province, on June 14, 2020. - Authorities in northwest Syria are taking steps to substitute the plummeting Syrian pound with the Turkish lira to shield their opposition-held region from an economic crisis ahead of new US sanctions, an official said. The Salvation Government -- a civilian body affiliated to the Hayat Tahrir al-Sham jihadist group which dominates the Idlib region -- had already started paying wa
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The US dollar stockpiles of countries have taken on a new importance amid the global economic turmoil caused by the COVID-19 pandemic. The turmoil has forced countries to review how they manage the gaps between their assets and liabilities and enact fresh measures. As a result, the adequacy of foreign currency reserves in meeting short-term liabilities has become a closely watched indicator.

report released by the International Monetary Fund (IMF) last week, offers data comparing central bank reserves to the short-term liabilities of countries. The document — an update to the IMF global financial stability report — reveals that the reserves of Turkey’s central bank are below the adequacy limit. The ratio of foreign currency reserves to short-term liabilities, supposed to be at least 100%, stands at about 80% for Turkey, which is shown in the most fragile group, along with South Africa, Chile and Egypt. In terms of the ratio of external financing requirements, including the current account balance and debts maturing within a year, to gross domestic product, Turkey is again among the most fragile countries, along with Poland and Malaysia. 

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