Turkey plans to tap into $6.6 billion reserves

Turkish Treasury and Finance Minister Berat Albayrak attends a news conference in Istanbul, Turkey, on April 10, 2019. (REUTERS/Umit Bektas/File Photo)
Updated 14 May 2019

Turkey plans to tap into $6.6 billion reserves

  • Turkey’s budget recorded a 36.2 billon lira deficit in the first quarter of 2019
  • Turkey’s economy tipped into recession last year after the lira fell sharply

ANJARA: Turkey is working on legislation to transfer the Turkish Central Bank’s 40 billion lira ($6.6 billion) legal reserves to the government’s budget, three economic officials have told Reuters.

The country’s budget, the sources claimed, are much deeper in deficit than had been expected, prompting the move. It is unclear when a draft law would reach parliament, though one of the sources said it could happen “soon.”

Turkey’s economy tipped into recession last year after the lira fell sharply. The currency is now under pressure partly due to worries over the bank’s depleted foreign exchange reserves, meant to defend against another crisis.

Separate to foreign exchange reserves, “legal reserves” are what the central bank sets aside from profits by law to be used in extraordinary circumstances. At the end of 2018, they stood at 27.6 billion lira, according to the bank’s balance sheet data.

A second source with knowledge of the matter said last year’s “legal reserves” combined with this year’s amounted to the 40-billion lira figure, which was cited by all three people who spoke to Reuters.

“The Turkish Central Bank has around 40 billion lira in legal reserves. The transfer of this amount to the 2019 central administration budget was seen as suitable. This step aims at improving and strengthening the budget,” the second source said.

It remains unclear how much of the reserves would ultimately be transferred and what, if any, new requirements would apply to the bank.

Officials from the bank and the Treasury could not immediately be reached for comment.

The transfer would mark the second recent move by Ankara to tap the bank’s funds to boost its budget. In January, it transferred some 37 billion lira in profits to the Treasury three months earlier than scheduled.

“I do not remember the use of legal reserves before. This method came up to stop further deterioration of the budget,” the first source said.

“There needs to be legislation to transfer the bank’s legal reserves. The new legislation is planned to be presented to parliament soon.”

Turkey’s budget recorded a 36.2 billon lira deficit in the first quarter of 2019, according to Treasury and Finance Ministry data. The deficit is expected to reach 80.6 billion lira by the end of 2019, not taking the possible tranfer into account.


Oil recoups losses as OPEC, US Fed see robust economy

Updated 14 November 2019

Oil recoups losses as OPEC, US Fed see robust economy

  • US-China trade deal will help remove ‘dark cloud’ over oil, says Barkindo

LONDON: Oil prices reversed early losses on Wednesday after the Organization of the Petroleum Exporting Countries (OPEC) said it saw no signs of global recession and rival US shale oil production could grow by much less than expected in 2020.

Also supporting prices were comments by US Federal Reserve Chair Jerome Powell, who said the US economy would see a “sustained expansion” with the full impact of recent interest rate cuts still to be felt.

Brent crude futures stood roughly flat at around $62 per barrel by 1450 GMT, having fallen by over 1 percent earlier in the day. US West Texas Intermediate crude was at $56 per barrel, up 20 cents or 0.4 percent.

“The baseline outlook remains favorable,” Powell said.

OPEC Secretary-General Mohammad Barkindo said global economic fundamentals remained strong and that he was still confident that the US and China would reach a trade deal.

“It will almost remove that dark cloud that had engulfed the global economy,” Barkindo said, adding it was too early to discuss the output policy of OPEC’s December meeting.

HIGHLIGHT

  • US oil production likely to grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations.
  • The prospects for ‘US crude exports had turned bleak after shipping rates jumped last month.’

He also said some US companies were now saying US oil production would grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations — reducing the risk of an oil glut next year.

US President Donald Trump said on Tuesday Washington and Beijing were close to finalizing a trade deal, but he fell short of providing a date or venue for the signing ceremony.

“The expectations of an inventory build in the US and uncertainty over the OPEC+ strategy on output cuts and US/China trade deal are weighing on oil prices,” said analysts at ING, including the head of commodity strategy Warren Patterson.

In the US, crude oil inventories were forecast to have risen for a third straight week last week, while refined products inventories likely declined, a preliminary Reuters poll showed on Tuesday.

ANZ analysts said the prospects for US crude exports had turned bleak after shipping rates jumped last month.