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The Central Bank of the Republic of Türkiye (TCMB) has deployed $16.1 billion from its foreign-currency reserves since September's fund scandal, including $5.7 billion in sales during the week ended Oct. 23, according to a report.
Several investment funds failed to meet investor redemption requests in mid-September. Authorities ordered the liquidation of 131 funds within six months, affecting over 455,000 investors with combined assets estimated at ₺936.3 billion ($19.1 billion) at the time.
Continued foreign-currency sales amid accelerated capital outflows have put further pressure on reserves, with net reserves falling by $8.7 billion to $42.8 billion in the week ended Oct. 23, according to data compiled by Ekonomim based on QNB economists' calculations.
The decline in net reserves partly reflects a $2.5 billion reduction linked to falling gold prices, while the public sector's foreign-currency deposits dropped by $0.4 billion during the same period.
Net reserves excluding swaps dropped by $8.6 billion in the week ended Oct. 23 to $30.8 billion, down from $50 billion in the week ended Sept. 11, according to QNB economists.
Gross foreign exchange reserves also declined by $6.8 billion to $162.3 billion during the week. Total reserves fell by $16.4 billion between the week ended Sept. 11 and the week ended Oct. 23, according to the report.
Several factors contributed to the weekly decline in net reserves. Falling gold prices accounted for an estimated $2.5 billion reduction, while the public sector's foreign-currency deposits decreased by $0.4 billion.
Sell-side swap transactions with domestic banks also increased by $0.1 billion during the week, further weighing on net reserves.
Meanwhile, foreign currency held by banks at the TCMB under reserve requirement and collateral deposit arrangements increased by $1.9 billion, providing support to gross reserves. Excluding this increase, net reserves declined by $8.7 billion to $42.8 billion.
QNB economists estimated that the transactions they identified accounted for a $3 billion decline in net reserves during the week. Based on the overall change in net reserves, they calculated that the remaining transactions involved $5.7 billion in foreign-currency sales.
The TCMB has purchased foreign currency in only one week since the fund turmoil began, selling it in every other week, according to the figures. The central bank sold $7.4 billion in the week ended Sept. 18, followed by $1.8 billion in the week ended Sept. 25 and $2.1 billion in the week ended Oct. 2.
It then purchased $5.7 billion in foreign currency in the week ended Oct. 9 before returning to sales, offloading $4.8 billion in the week ended Oct. 16 and another $5.7 billion in the week ended Oct. 23. The report said the latest sales bring the central bank's estimated net foreign-currency sales since the start of the year to about $26 billion.
TCMB Governor Fatih Karahan told lawmakers in early October that a significant portion of the money withdrawn from investment funds had moved into bank deposits, which increased by more than ₺800 billion during the period.
He said the risk of the turmoil spreading to the wider financial system remained limited, citing the weak links between the funds undergoing liquidation and the rest of the financial system.
Speaking at the IMF and World Bank annual meetings in Bangkok later in October, Karahan maintained that the fund turmoil had not significantly weakened domestic residents’ preference for Turkish lira-denominated assets, saying their preference for the lira remained robust overall.
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