Central Bank acted legally in FX transactions: Minister

ANKARA

The Turkish Central Bank has been using the legal authority given to it by laws to keep the foreign exchange markets under control and protect the value of the Turkish Lira, Treasury and Finance Minister Lütfi Elvan said on April 19.

“The Central Bank has been using the inflation targeting regime since 2006,” Elvan said in an interview with news channel NTV.

“Within the framework of this regime, it uses two types of instruments to ensure financial stability: Required reserves and foreign exchange transactions.”

Elvan said bank intervenes directly in the markets when faced with an extraordinary situation and all foreign exchange transactions made by the Central Bank are recorded.

“You may discuss the method, but you cannot accuse anyone of corruption,” the ministry said regarding the opposition’s allegations that $128 billion of the bank’s reserves were missing.

“There is no question of corruption,” Elvan said.

It would be appropriate for the Central Bank to reveal the details of all foreign exchange transactions through state-banks and other primary dealers, he added.

He also said that the back-door scheme to sell forex was not implemented since he took office in November 2020.
On April 16, Central Bank Governor Şahap Kavcıoğlu said that the bank prioritized financial stability and protecting the national economy during the COVID-19 pandemic and conducted foreign exchange transactions transparently in this period.

Pointing to a protocol signed by the Central Bank and the Turkish Treasury to regulate FX sales through state banks in 2017, Kavcıoğlu underlined that all those transactions are made transparently in accordance with international standards.

The governor strongly denied claims that FX transactions were made with some banks and firms below market prices, emphasizing that platforms used by the bank “technically” does not allow making transactions with “non-market” pricing.

Regarding questions brought forward by opposition parties on the alleged $128 billion FX reserves sold by the Central Bank in a bid to curb the rising U.S. dollar/Turkish Lira exchange rate, Kavcıoğlu said: “As in many developing countries, rising capital outflows, decreasing direct investments, increasing demand to gold, and FX earning activities, such as tourism and exports, coming to a halt under extraordinary conditions caused by the pandemic prompted a high foreign exchange demand in Turkey’s economy.”

The Central Bank acted to meet foreign currency liquidity demand in a bid to provide macro financial stability, he said. Those moves helped protect the economy’s production infrastructure, employment and export capacity, said Kavcıoğlu, adding that the real sector, financial institutions and public companies faced no hurdle in fulfilling external liabilities.

“Thanks to steps taken in both monetary policy and fiscal policy, Turkey was one of the two G20 countries posting growth in 2020 despite the adverse impacts of the pandemic,” he said.