Turkiye’s forex reserves turn negative ahead of critical runoff vote

The Turkiye central bank’s net foreign exchange reserves turned negative for the first time since 2002. (Reuters/File Photo)
The Turkiye central bank’s net foreign exchange reserves turned negative for the first time since 2002. (Reuters/File Photo)
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Updated 26 May 2023
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Turkiye’s forex reserves turn negative ahead of critical runoff vote

Turkiye’s forex reserves turn negative ahead of critical runoff vote
  • ‘Govt to blame for using monetary policy to win polls’
  • Winner must address inflation, debt, lira’s value, say experts

ANKARA: As Turkiye heads to a critical runoff vote to determine the nation’s president on Sunday, the central bank’s net foreign exchange reserves turned negative for the first time since 2002, dropping to minus-$151.3 million on May 19, due to increased market demand since the first round of the elections.

Experts say the current course in Turkiye, one of the world’s 20 largest economies, is connected to the controversial efforts of the incumbent government to win the elections by trying to hold the Turkish lira relatively steady with unorthodox policies and low interest rates amid high inflation.

However, keeping interest rates low also bears risky consequences despite its short-term advantages.

Selva Demiralp, a professor of economics at Koc University in Istanbul, said: “The central bank’s foreign currency reserves are meant to be a buffer during times of temporary volatility. They are not supposed to be used as a monetary policy tool in a free exchange rate system, simply because they are of limited supply.”

“Turkiye’s central bank has done the latter, however, and tried to offset the adverse effects of a low interest rate environment on the exchange rate by selling foreign currency reserves. As of now, these reserves are mostly depleted with gross reserves of around $100 billion and net reserves are close to (zero). After adjusting for swap agreements, the net reserves become deeply negative around (minus) $60 billion,” she told Arab News.

For an economy with a monthly current account deficit of around $8 billion, Demiralp thinks that the negative value of net reserves is alarming because it can cause disruptions in trade, considering that Turkiye relies on imports of intermediate goods in its production structure.

“Hence potential disruptions in supply chains due to lack of foreign exchange would not only affect Turkish production but would also affect the production of our trade partners in today’s global production network where most countries are interconnected through supply chains,” she said.

“Because the presence of foreign investments in Turkiye is rather minimal at the moment, it would not make much of a change regarding the foreign investors’ hesitance about entering Turkish markets. The decline in reserves and the consequent increase in Turkiye’s risk premium would increase the external borrowing costs of the domestic investors, however,” Demiralp said.

There are still uncertainties over whether the new government will stick with the current economic program of encouraging exports and economic growth with rate cuts and strictly monitored foreign exchange markets, or switch to another model with gradual interest rate hikes.

Kemal Kilicdaroglu, the opposition’s contender against President Recep Tayyip Erdogan, has promised a return to orthodox and investor-friendly economic policies with rate hikes.

However, even if he comes to power, the parliamentary majority will still be in the hands of Erdogan’s Justice and Development Party and its alliance, which will restrict the ability to manage a new financial program.

Sky-high inflation rates reaching 44 percent and depleted foreign reserves still pose significant challenges. The country will also face local elections next March that requires the need to sustain economic stability for some time.

However, Erdogan recently told CNN he would not change his economic policy if he wins a third presidential term. This means the currency might sink further, while more restrictions might also be placed on foreign currency withdrawals.

Economist Demiralp believes that the likely scenario after the elections is a gradual hiking of rates to ease the pressures on the foreign exchange market and encourage capital inflows.

“This goes against the signals and the guidance by government officials. Nevertheless, the alternative to the orthodox policies is stricter capital controls and I believe the costs of that route would far outweigh the costs of a tightening cycle on the Turkish economy,” she added.

The national currency continues slipping to record lows against the euro and the US dollar. It has lost almost 80 percent of its value against the dollar over the past five years.

Russia recently agreed to delay some of Turkiye’s payment for natural gas imports — a $600-million bill — to next year, while in March Saudi Arabia deposited $5 billion in Turkiye’s central bank.

Following Sunday’s elections, among the winning side’s top priorities would be to address skyrocketing inflation and the plummeting lira.

Emre Akcakmak, a Dubai-based senior consultant at East Capital, said that regardless of the winning candidate, there are several issues that the new government must address urgently.

“The central bank’s declining net international reserves, growing short-term external debt, large current account deficit, high inflation, and a massive pile of foreign currency-protected deposits are just a few of the many,” he told Arab News.

According to Akcakmak, although the net international reserves have fallen into negative territory, the central bank still has some room to delay major action, considering the usable gross reserves.

“However, time is ticking away, and potential troubles are deepening as long as there is no decisive policy response,” he said.

The incumbent government of Turkiye has long rejected any suggestion of a rescue package from the International Monetary Fund as an external solution to its financing needs, and reaching an agreement with the IMF is still not on its agenda.

“There is a lot of talk about the IMF as an external solution, but the reality is that the international reserves are already supported by external sources, given significant foreign central bank swaps and deposits,” said Akcakmak.

“A solution should ultimately come from within, with a strong and comprehensive policy response that takes a long-term view, rather than solely addressing the immediate challenges,” he added.

In April, the IMF raised Turkiye’s economic growth forecast to 3.6 percent for next year but lowered the country’s economic growth forecast for this year to 2.7 percent.


The Gaza Strip: Tiny, cramped and as densely populated as London

The Gaza Strip: Tiny, cramped and as densely populated as London
Updated 11 sec ago
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The Gaza Strip: Tiny, cramped and as densely populated as London

The Gaza Strip: Tiny, cramped and as densely populated as London
  • Gaza has a population density of about 14,000 people per square mile (5,500 per square kilometer)

GAZA: The war between Israel and Hamas has seen fierce Israeli bombardment that has flattened broad swaths of the Gaza Strip. Thousands of people have been killed and hundreds of thousands have been displaced.
And all that is happening in a tiny, densely populated coastal enclave.
Gaza is tucked among Israel, Egypt and the Mediterranean Sea. The strip is 25 miles (40 kilometers) long by some 7 miles (11 kilometers) wide. It has 2.3 million people living in an area of 139 square miles (360 square kilometers), according to the CIA Factbook.
That’s about the same land size as Detroit, a city that has a population of 620,000, according to the US Census Bureau. It’s about twice the size of Washington and 3½ times the size of Paris.
Gaza has a population density of about 14,000 people per square mile (5,500 per square kilometer). That’s about the same as London, a city brimming with high-rise buildings, but also many parks. Gaza has few open spaces, especially in its cities, due to lack of planning and urban sprawl.
Gaza’s density is even tighter in its urban cores like Gaza City or Khan Younis, where tens of thousands are packed into cramped neighborhoods and where density rates become more comparable to certain cities in highly populated Asia.
An Israeli-Egyptian blockade, imposed after the Hamas militant group seized power in 2007, has greatly restricted movement in and out of Gaza, adding to the sense of overcrowding.
 

 


’Living dead’: Tunisian villages suffer drought, climate change

’Living dead’: Tunisian villages suffer drought, climate change
Updated 2 min 2 sec ago
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’Living dead’: Tunisian villages suffer drought, climate change

’Living dead’: Tunisian villages suffer drought, climate change
  • About 300,000 of Tunisia’s 12 million people have no drinking water in their homes, according to the Tunisian Forum for Economic and Social Rights

OULED OMAR, Tunisia: Tunisian villager Ounissa Mazhoud ties two empty jerry cans to a donkey and cautiously descends a stony hill toward the last local source of water.
The North African country, in its fourth year of drought, is grappling with its worst water scarcity in years.
Mazhoud — like other women in the remote village of Ouled Omar, 180 kilometers (110 miles) southwest of the capital Tunis — wakes up every morning with one thing on her mind: finding water.
“We are the living dead ... forgotten by everyone,” said Mazhoud, 57, whose region was once one of Tunisia’s most fertile, known for its wheat fields and Aleppo pines.
“We have no roads, no water, no aid, no decent housing, and we own nothing,” she said, adding that the closest source of water is a river about an hour’s arduous walk away.
Providing water for their families, she said, means that “our backs, heads and knees hurt, because we labor from dawn to dusk.”

The World Bank predicts that by 2030 the Middle East and North Africa region will fall below the “absolute water scarcity” threshold of 500 cubic meters yearly per person.
Tunisia, already the 33rd most water-stressed country according to the World Resources Institute, has dropped to 450 cubic meters per inhabitant.
Its dams — the primary source for drinking water and irrigating crops — are filled at just 22 percent capacity, despite brief showers recently, according to official figures.
Some 20 dams have already gone out of service, mostly in the most arid south.
Last spring, Tunisian authorities introduced water rationing to limit household use even in major cities.
But in remote villages, where water scarcity impacts crucial farming and livestock, the issue takes on even greater weight.
Ounissa’s 65-year-old husband, Mahmoud Mazhoud, said their village has become unable to support livestock, forcing him to sell half of his cow herd so he could afford to keep the rest alive.
Ouled Omar is home to 22 families who share the only remaining spring.
They say it yields only about 10 liters (2.6 gallons) of water per day in total, but that it is undrinkable.

Ramzi Sebtaoui, a stockbreeder in his thirties, brings water to his family every day by driving to the closest source, some 20 kilometers away in the city of Maktar.
“Two or three years ago, the situation was much better, with many natural sources of water that we could use for livestock,” he said.
“Today, due to climate change and other factors, almost all sources have dried up, and the roads are destroyed.”
Last week, Ouled Omar residents traveled almost 50 kilometers to the city of Siliana to protest outside governorate offices, demanding a paved road and access to clean water.
“They don’t have a source of drinking water, not even taps,” Houda Mazhoud, a researcher who has been advocating for Ouled Omar’s access to clean water for years, told AFP.
“As a result, they use a natural source. But with climate change, it’s starting to disappear.”

The only road that leads to the village is decrepit and hasn’t been paved in decades, and residents say this only deepens their sense of isolation.
Some villagers have felt pushed to move to urban areas or abroad.
About 300,000 of Tunisia’s 12 million people have no drinking water in their homes, according to the Tunisian Forum for Economic and Social Rights.
Ounissa’s cousin, Djamila Mazhoud, 60, said her son and two daughters had all left in search of better lives.
“We educated our children so that when we grow old, they take care of us, but they couldn’t,” she said.
“People are either unemployed or eaten by the fish in the sea,” she added, using a common phrase for migrants who attempt the dangerous sea voyages for Europe.
Entire families have already left the village, said Djamila.
“Their houses remain empty,” she said, explaining that elderly people feel they have no choice but to follow their sons and daughters.
“Can an 80-year-old go to the river to get water?“

 


Detained Iran protesters raped, sexually assaulted: Amnesty

Detained Iran protesters raped, sexually assaulted: Amnesty
Updated 06 December 2023
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Detained Iran protesters raped, sexually assaulted: Amnesty

Detained Iran protesters raped, sexually assaulted: Amnesty

PARIS: Members of the Iranian security forces raped and used other forms of sexual violence against women and men detained in the crackdown on nationwide protests that erupted from September 2022, Amnesty International said Wednesday.
Amnesty said in a report it had documented 45 such cases of rape, gang rape or sexual violence against protesters. With cases in more than half of Iran’s provinces, it expressed fear these documented violations appeared part of a “wider pattern.”
“Our research exposes how intelligence and security agents in Iran used rape and other sexual violence to torture, punish and inflict lasting physical and psychological damage on protesters, including children as young as 12,” Amnesty’s secretary general Agnes Callamard said.
The London-based organization said it had shared its findings with the Iranian authorities on November 24 “but has thus far received no response.”
The protests began in Iran in September 2022 after the death in police custody of Mahsa Amini, 22. Her family says she was killed by a blow to the head but this has always been disputed by the Iranian authorities.
After rattling Iran’s clerical leadership, the movement lost momentum by the end of that year in the face of a fierce crackdown that left hundreds dead, according to rights activists, and thousands arrested, according to the United Nations.
Amnesty said 16 of the 45 cases documented in the report were of rape, including six women, seven men, a 14-year-old girl, and two boys aged 16 and 17.
Six of them — four women and two men — were gang raped by up to 10 male agents, it said.
It said the sexual assaults were carried out by members of the Revolutionary Guards, the paramilitary Basij force, agents of the intelligence ministry, as well as police officers.
The rapes on women and men were carried out with “wooden and metal batons, glass bottles, hosepipes, and/or agents’ sexual organs and fingers,” it said.
As well as the 16 rape victims, Amnesty said it documented the cases of 29 victims of other forms of sexual violence such as the beating of breasts and genitals, enforced nudity, and inserting needles or applying ice to men’s testicles.
It said it collected the testimony through interviews with the victims and other witnesses, conducted remotely via secure communications platforms.
“The harrowing testimonies we collected point to a wider pattern in the use of sexual violence as a key weapon in the Iranian authorities’ armory of repression of the protests and suppression of dissent to cling to power at all costs,” said Callamard.
One woman, named only as Maryam, who was arrested and held for two months after removing her headscarf in a protest, told Amnesty she was raped by two agents during an interrogation.
“He (the interrogator) called two others to come in and told them ‘It’s time’. They started ripping my clothes. I was screaming and begging them to stop.
“They violently raped me in my vagina with their sexual organs and raped me anally with a drink bottle. Even animals don’t do these things,” she was quoted by the group as saying.
A man named as Farzad told Amnesty that plain clothes agents gang raped him and another male protester, Shahed, while they were inside a vehicle.
“They pulled down my trousers and raped me. I couldn’t scream out. I was really being ripped apart... I was throwing up a lot, and was bleeding from my rectum when I went to the toilet,” said Farzad who was released without charge a few days later.
Amnesty said most victims did not file complaints against the assault for fear of further consequences, and those who did tell prosecutors were ignored.
“With no prospects for justice domestically, the international community has a duty to stand with the survivors and pursue justice,” said Callamard.


Israel not doing enough to allow fuel, aid into Gaza -US

An ambulance is stopped by Israeli army forces during a raid in Jenin, in the Israeli-occupied West Bank December 5, 2023.
An ambulance is stopped by Israeli army forces during a raid in Jenin, in the Israeli-occupied West Bank December 5, 2023.
Updated 06 December 2023
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Israel not doing enough to allow fuel, aid into Gaza -US

An ambulance is stopped by Israeli army forces during a raid in Jenin, in the Israeli-occupied West Bank December 5, 2023.
  • Israeli forces stormed southern Gaza’s main city of Khan Younis on Tuesday, and hospitals struggled to cope with scores of Palestinian dead and wounded

WASHINGTON: Israel needs to do more to allow fuel and other aid into Gaza, the United States said on Tuesday as Israel’s offensive against Hamas in southern areas of the Palestinian enclave intensified.
“The level of assistance that’s getting in is not sufficient,” US State Department spokesperson Matthew Miller said at a press briefing. “It needs to go up, and we’ve made that clear to the government of Israel.”
On Monday, 100 humanitarian aid trucks and about 69,000 liters of fuel were delivered to Gaza from Egypt, the United Nations said, about the same as Sunday.
“This is well below the daily average of 170 trucks and 110,000 liters of fuel that had entered during the humanitarian pause that took place between 24 and 30 November,” UN spokesperson Stephane Dujarric told reporters on Tuesday.
US Secretary of State Antony Blinken, on his third trip to the Middle East since the Hamas attack on Israel from Gaza on Oct. 7, last week pressed the Israeli government to increase the flow of aid and to minimize civilian harm in its offensive against Hamas.
Israeli forces stormed southern Gaza’s main city of Khan Younis on Tuesday, and hospitals struggled to cope with scores of Palestinian dead and wounded.
In what appeared to be the biggest ground assault in Gaza since a truce with Hamas unraveled last week, Israel said its troops — who were backed by warplanes — had reached the heart of Khan Younis and were surrounding the city
A World Health Organization official in Gaza said on Tuesday the situation was deteriorating by the hour.

 

 


UN food agency stops deliveries to millions in Yemen areas controlled by Houthi rebels

UN food agency stops deliveries to millions in Yemen areas controlled by Houthi rebels
Updated 06 December 2023
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UN food agency stops deliveries to millions in Yemen areas controlled by Houthi rebels

UN food agency stops deliveries to millions in Yemen areas controlled by Houthi rebels

UNITED NATIONS: The United Nations food agency said Tuesday it is stopping food distribution in areas of war-torn Yemen controlled by the Houthi rebels, a move that will impact millions of people.
The World Food Program said the “pause” was driven by limited funding and the lack of agreement with the rebel authorities on downscaling the program to match the agency’s resources.
“This difficult decision, made in consultation with donors, comes after nearly a year of negotiations, during which no agreement was reached to reduce the number of people served from 9.5 million to 6.5 million,” WFP said in a statement.
UN spokesman Stephane Dujarric said WFP has tried unsuccessfully “to establish a system that is safe and accountable for the aid going through” to the rebel-held areas.
The war in Yemen has raged for eight years between the Iran-backed Houthis and pro-government forces, backed by a coalition of Gulf Arab states. The Houthis swept down from the mountains in 2014, seized much of northern Yemen and the country’s capital, Sanaa, and forced the internationally recognized government to flee into exile to Saudi Arabia. Since then, more than 150,000 people have been killed by the violence and 3 million have been displaced.
The WFP announcement came as the Houthis have unleashed attacks on ships in the Red Sea, imperiling traffic along one of the world’s most vital shipping lanes, critical to global trade. The Houthis support the Palestinian militant Hamas group and the attacks are linked to the ongoing Israeli-Hamas war.
WFP said food stocks in Houthi-controlled areas “are now almost completely depleted and resuming food assistance, even with an immediate agreement, could take up to as long as four months due to the disruption of the supply chain.”
The Rome-based UN agency said it will continue its other programs, such as nutrition and school feeding projects, to limit the impact of the pause in food distributions. In government-controlled areas of Yemen, WFP said general food distribution will continue “with a heightened focus on the most vulnerable families.”
“Similar prioritization is taking place in nearly half of WFP’s operations around the world as the agency navigates the challenging financial landscape that the entire humanitarian sector is facing,” the agency said.
At the end of October, WFP and the UN Food and Agriculture Organization warned that acute food insecurity is likely to deteriorate further in Yemen through April 2024. It called for urgent and scaled-up assistance to Yemen and 17 other “hunger hotspots” to protect livelihoods and increase access to food.