- Turkey’s budget recorded a 36.2 billon lira deficit in the first quarter of 2019
- Turkey’s economy tipped into recession last year after the lira fell sharply
ANJARA: Turkey is working on legislation to transfer the Turkish Central Bank’s 40 billion lira ($6.6 billion) legal reserves to the government’s budget, three economic officials have told Reuters.
The country’s budget, the sources claimed, are much deeper in deficit than had been expected, prompting the move. It is unclear when a draft law would reach parliament, though one of the sources said it could happen “soon.”
Turkey’s economy tipped into recession last year after the lira fell sharply. The currency is now under pressure partly due to worries over the bank’s depleted foreign exchange reserves, meant to 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 the end of 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.
“The Turkish Central Bank has around 40 billion lira in legal reserves. The transfer of this amount to the 2019 central administration budget was seen as suitable. This step aims at improving and strengthening the budget,” the second source said.
It remains unclear how much of the reserves would ultimately be transferred and what, if any, new requirements would apply to the bank.
Officials from the bank and the Treasury could not immediately be reached for comment.
The transfer would mark the second recent move by Ankara to tap the bank’s funds to boost its budget. In January, it transferred some 37 billion lira in profits to the Treasury three months earlier than scheduled.
“I do not remember the use of legal reserves before. This method came up to stop further deterioration of the budget,” the first source said.
“There needs to be legislation to transfer the bank’s legal reserves. The new legislation is planned to be presented to parliament soon.”
Turkey’s budget recorded a 36.2 billon lira deficit in the first quarter of 2019, according to Treasury and Finance Ministry data. The deficit is expected to reach 80.6 billion lira by the end of 2019, not taking the possible tranfer into account.