Turkey to tap 40b lira from central bank reserves

Turkey’s Treasury ministry is working on legislation to transfer the central bank’s 40 billion lira ($6.6 billion) in legal reserves to the government’s budget to shore it up, three economic officials told Reuters.

The budget is deeper in deficit than expected, said the sources, who requested anonymity because they were not authorized to speak publicly.

It was unclear when or whether the draft law would reach parliament, however, though one of the sources said it would happen “soon.”

Turkey’s economy tipped into recession last year after the lira fell sharply. The currency is under pressure again, in part due to worries over the central bank’s depleted foreign exchange reserves, which would help it 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 end-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.