As a reflection of the 650 billion USD SDR (special drawing rights) provided to countries from the IMF, a 6.4 billion USD contribution will be made to Turkey’s foreign exchange reserves. While the allocation of SDR will increase Turkey’s gross reserves, it will not contribute to net reserves.
Coming to the definition of SDR; We can describe it as an inter-country reserve created by the IMF to support international liquidity. The reason for issuing this reserve instrument is the need to increase and support international liquidity. In the allocation of SDRs to countries; A country’s IMF quota determines the maximum amount of financial resources it has to contribute to the fund. Allocations are not made regularly and only happen on rare occasions. For example, extraordinary conditions; During the 2009 global financial crisis, the allocation was made to “provide liquidity to the global economic system and supplement the official reserves of member countries”. 2011 allocations were made to low-income member states. The 2021 assignment aims to promote resilience and stability in the global economy battered by the Covid-19 pandemic.
Currencies included in the SDR are; consists of major economy currencies with international reserve status. Their weight in the basket is adjusted by taking into account the current importance of currencies in terms of international trade and national foreign exchange reserves. The IMF reviews the weights every 5 years. Current weighting with the latest addition of Renminbi (Chinese Yuan, CNY); USD 41.73%, EUR 30.93%, CNY 10.92%, JPY 8.33% and GBP 8.09%.
Let’s come to the reserves of the Central Bank. The reserves announced by the CBRT; gross reserves. Within this; There are variables such as Central Bank assets, required reserves that banks have to keep in CBRT accounts, swap transactions with banks and abroad, and international reserve instruments. Net reserves are simply the figure we have reached by eliminating the external borrowing reserve sources that contribute to the reserve in the Central Bank’s balance sheet. Methodical calculation of this is: Foreign Assets Item in Assets – Total Foreign Currency Liabilities in Liabilities. Well; There are no reserve resources in net reserves that are not owned by the Central Bank and will exit from the balance sheet. Among these reserve resources; When we subtract the foreign currency obtained through swap transactions, we reach the net reserves excluding swaps. The importance of net reserves; It is important in terms of creating a buffer on the foreign debt of the country and alleviating the negative effects caused by currency shocks that create price instability. In other words; The higher the Central Bank’s ability to use its net reserves under necessary conditions, the greater its ability to mitigate shocks to the economy and the functioning of the market. Net reserves must therefore be solid and supported.
After the decline in the 2019 and 2020 periods, when the value of the country’s currency fell and no interest rate hikes were desired, the central bank decided to increase its reserves by expanding its international swap agreements and RRs with local banks. The China swap agreement, which was expanded in June, and the newly signed 17.5 billion TRY (2 billion USD) Korean swap agreement will contribute to the total reserves. Swap (Swap transactions are various, we are talking about the exchange of money between the Central banks) is the process of exchanging the currencies of two countries for a certain maturity. . Once the swap agreement expires, the exchanged currencies will be exchanged again in the opposite direction. In other words, the reserve effect in swaps is actually temporary and is a “currency loan” effect.
SDR + swap agreements (existing with China and Qatar and new Korean agreement) + rediscount credits will increase gross reserves, but the situation requiring caution regarding net reserves will remain.
Kaynak Tera Yatırım
Hibya Haber Ajansı
Kaynak: Hibya Haber Ajansı
