Turkey at risk of a financial crisis

Turkey's foreign currency reserves plunged by 75% last year, raising concerns about a possible balance of payments crisis.

The central bank's foreign currency reserves were badly depleted by a 2019-2020 policy of state bank sales of some $128 billion to support the beleaguered Turkish lira.

Excluding swaps with state banks, the central bank's foreign currency reserves are deeply negative, official data show.

Turkish regime has failed to stop lira steady decline against the dollar. Central Bank reserves have borne most of the losses due to lira fall.

A year ago, Turkey appealed to foreign allies for new swap funding but secured little. Interest rate hikes starting in September briefly eased economic pressure, though the lira touched a new low earlier this month.

Turkey's President has fired three central-bank governors in under two years, making the already weak lira ever more vulnerable and putting the country at risk of a financial crisis.

Last year, the lira lost nearly 30 percent against the dollar on concerns over the independence of the central bank and worsening ties with Washington.

Investors have expressed concerned about what they see as the Turkish central bank’s lack of independence from Erdogan who has said that interest rates are “the devil.”