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Official Turkish figures show that the country's net foreign exchange reserves have fallen into negative territory for the first time since 2002. Specifically, the net foreign exchange reserves of the Central Bank of Türkiye (CBT) recorded a loss of $151.3 million on May 19.
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| Incumbent Turkish President Recep Tayyip Erdogan during a campaign rally in Ankara, April 30, 2023. Source: VNA (Vietnam News Agency) |
According to analysts, for an economy with a monthly current account deficit of approximately $8 billion, a negative net foreign exchange reserve is alarming. This is because it could disrupt trade, cut off supply chains, and halt production not only in Turkey but also in its partners within the global production network. Recently, Russia had to agree to allow Turkey to postpone the payment of $600 million for natural gas imports until 2024.
Earlier in March, Saudi Arabia had to send $5 billion to the CBT to help Ankara alleviate its foreign exchange shortage. Depleted foreign exchange reserves and high inflation, currently at 44%, are posing significant challenges to the Turkish economy. Meanwhile, the Turkish lira has fallen to record lows against the euro and the dollar, losing nearly 80% of its value in the past five years.
This dire situation presents an extremely difficult challenge for the winner of the Turkish presidential election on May 28th. This is considered the most important election for Turkey in the last 100 years, not only determining the country's future leader but also how to handle the current severe economic crisis. Regardless of who wins, the new Turkish government will urgently need to address issues related to dwindling foreign exchange reserves, increasing short-term foreign debt, a ballooning current account deficit, and high inflation.
However, incumbent President Recep Tayyip Erdogan, who led by 49.5% in the first round, promised “a new Türkiye” but insisted he would not change economic policies if elected for a third term.
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