Turkey ‘will run out of dollars by July’, economists warn

An aerial view taken on May 2, 2020 shows the Galata tower (C) and the Beyoglu district in Istanbul, during a three-day curfew to prevent the spread of the COVID-19 disease, caused by the novel coronavirus. (AFP / Ozan Kose)
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Updated 03 May 2020

Turkey ‘will run out of dollars by July’, economists warn

  • Central bank burns through billions protecting lira
  • Coronavirus to cost $25 billion in lost tourism revenues

ANKARA: Turkey is burning through its reserves of foreign currency in a futile attempt to prop up the collapsing lira, and may run out of US dollars by July, economists told Arab News on Saturday.

President Recep Tayyip Erdogan is also facing a double economic challenge from the coronavirus pandemic — the soaring cost of lockdowns and movement restrictions to curb the spread of the virus, and the fact that COVID-19 will prevent the usual summer tourist boom.

The Turkish lira has lost 14 percent of its value since January, and about 36 percent over the past two years. Last week it plunged past the psychologically significant level of seven to the US dollar.


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In response, Turkey’s central bank has supplied $32 billion in foreign reserves for state banks to support the lira in the first four months of this year, the same as the whole of last year. 

The central bank’s own hard currency reserves fell to $25.9 billion in mid-April from about $40 billion at the start of the year.

One foreign exchange trader estimated that the central bank’s reserves fell into negative territory last week, by $2 billion. “No country can withstand such rapid reserve losses for a long time,” the trader said.  

Analysts at TD Securities have estimated that Turkey may run out foreign currency reserves as early as July if the pressure on its currency keeps intensifying

A lightning strikes over the Bosphorus in the night in Istanbul on May 2, 2020. Analysts warn of dark skies ahead as the soaring cost of lockdowns and movement restrictions to curb the spread of the virus take their toll on the economy. (AFP photo / Bulent Kilic)

Central bank governor Murat Uysal has admitted that the COVID-19 pandemic has produced “extraordinary conditions” in which there may be volatility in the bank’s financial buffer. But Wolfango Piccoli, a political risk analyst at Teneo Intelligence in London, said the bank’s policy was unsustainable because it had insufficient resources left to manage the downturn.

“Even if it manages to get swap lines from the US Fed, that would only give some time, but will not fix the ongoing financial problems,” he told Arab News.

“And these swap lines will be of very limited amount, and are unlikely to provide a significant breathing space for the currency.”

Piccoli said Turkey’s monetary and fiscal policies lacked credibility in the eyes of markets, and attempts by the central bank to sustain the lira make that lack of credibility even worse.

Turkey is also facing the collapse of its tourism industry. The central bank’s latest annual inflation report projects that “the loss in tourism revenues will bring important reflections on growth, employment and the current accounts balance.”

Loss of tourism revenues for the remaining three quarters of the year may reach $25 billion. 

Experts also note that about two-thirds of these tourism revenues are collected in the summer months, which will be also a “lost period” because of the continuing effects of the coronavirus pandemic.

Iran prepares to bury killed nuclear scientist as it mulls response

Updated 30 November 2020

Iran prepares to bury killed nuclear scientist as it mulls response

  • Mohsen Fakhrizadeh died from wounds sustained in a firefight between his guards and unidentified gunmen near Tehran
  • President Hassan Rouhani has stressed the country will seek its revenge in “due time” and not be rushed into a “trap”

TEHRAN: Debate raged in Iran on Sunday over how and when to respond to a top nuclear scientist’s assassination, blamed on arch-foe Israel, as his body was honored at Shiite shrines to prepare it for burial.
Two days after Mohsen Fakhrizadeh died from wounds sustained in a firefight between his guards and unidentified gunmen near Tehran, parliament demanded a halt to international inspections of Iranian nuclear sites while a top official hinted Iran should leave the global non-proliferation treaty.
Iran’s Supreme National Security Council usually handles decisions related to the country’s nuclear program, and parliamentary bills must be approved by the powerful Guardians Council.
President Hassan Rouhani has stressed the country will seek its revenge in “due time” and not be rushed into a “trap.”
Israel says Fakhrizadeh was the head of an Iranian military nuclear program, the existence of which the Islamic republic has consistently denied, and Washington had sanctioned him in 2008 for activities linked to Iran’s atomic activities.
The scientist’s body was taken for a ceremony on Sunday at a major shrine in the holy city of Qom before being transported to the shrine of the Islamic republic’s founder Imam Khomeini, according to Iranian media.
On Monday live video from Tehran, shared by national outlet Iran Press, showed uniformed men gathering around images of Fakhrizadeh seemingly ahead of a procession.
His funeral will be held in the presence of senior military commanders and his family, the defense ministry said on its website, without specifying where.
Israel has not officially commented on Fakhrizadeh’s killing, less than two months before US President-elect Joe Biden is set to take office after four years of hawkish foreign policy under President Donald Trump.
Trump withdrew the US from a multilateral nuclear agreement with Iran in 2018 and then reimposed and beefed up punishing sanctions as part of its “maximum pressure” campaign against Tehran.
Biden has signalled his administration may be prepared to rejoin the accord, but the nuclear scientist’s assassination has revived opposition to the deal among Iranian conservatives.
The head of Iran’s Expediency Council, a key advisory and arbitration body, said there was “no reason why (Iran) should not reconsider the Nuclear Proliferation Treaty.”
Mohsen Rezai said Tehran should also halt implementation of the additional protocol, a document prescribing intrusive inspections of Iran’s nuclear facilitates.
Iran’s supreme leader Ayatollah Ali Khamenei called Saturday for Fakhrizadeh’s killers to be punished.
Parliament speaker Mohammad-Bagher Ghalibaf called Sunday for “a strong reaction” that would “deter and take revenge” on those behind the killing of Fakhrizadeh, who was aged 59 according to Iranian media.
For Israeli newspaper Haaretz, Fakhrizadeh’s killing was clearly tied to Biden’s arrival in office.
“The timing of the assassination, even if it was determined by purely operational considerations, is a clear message to President-elect Joe Biden, intended to show Israel’s criticism” of plans to revive the deal, it said.
The UAE, which in September normalized ties with Israel, condemned the killing and urged restraint.
The foreign ministry, quoted by the official Emirati news agency WAM, said Abu Dhabi “condemns the heinous assassination of Mohsen Fakhrizadeh, which could further fuel conflict in the region...
“The UAE calls upon all parties to exercise maximum degrees of self-restraint to avoid dragging the region into new levels of instability and threat to peace,” it said.
Britain, a party to the nuclear accord, said Sunday it was “concerned” about possible escalation of tensions in the Middle East following the assassination, while Turkey called the killing an act of “terrorism” that “upsets peace in the region.”
In Iran, ultra-conservative Kayhan daily called for strikes on Israel if it were “proven” to be behind the assassination.
Kayhan called for the port city of Haifa to be targeted “in a way that would annihilate its infrastructure and leave a heavy human toll.”
Iran has responded to the US withdrawal from the 2015 deal by gradually abandoning most of its key nuclear commitments under the agreement.
Rezai called on Iran’s atomic agency to take “minimum measures” such as “stopping the online broadcast of cameras, reducing or suspending inspectors and implementing restrictions in their access” to sites, ISNA news agency reported.
Iran’s parliament said the “best response” to the assassination would be to “revive Iran’s glorious nuclear industry.”
It called for International Atomic Energy Agency (IAEA) inspectors to be barred from the country’s atomic sites, said the legislature’s news agency ICANA.
Some MPs had earlier accused inspectors of acting as “spies” potentially responsible for Fakhrizadeh’s death.
But the spokesman for Iran’s atomic energy organization, Behrouz Kamalvandi, told IRNA on Saturday that the issue of inspectors’ access “must be decided on at high levels” of the Islamic republic’s leadership.