Dipping into reserves?
The opposition lambasts the AK Party over rumors it is preparing to use reserve fund
The reports claiming that the Central Bank’s $40 billion of reserve to be transferred to the central government budget was planned, or worked on aa a legal regulation, were not denied by the economic administration.
The Parliament will work until the end of this month. After the holiday, the deputies will be on the agenda for the renewed elections for the mayoralty of Istanbul Metropolitan Municipality on June 23. In other words, there is a twoweek working period ahead for the Parliament. Meanwhile, AKP has been working on a ‘mini economy’ bag law, expected to include regulations regarding the economy. It is stated that this bag law will include the demands of various ministries and some regulations regarding Istanbul. All eyes are on this bag law to see whether any regulation regarding the transfer of $40 billion from the Central Bank’s contingency reserve to central government budget is also included. The AKP Group in the parliament hasn’t given any information on the context of this bill.
CHP: Economy is being made more fragile than it is
The reports about the transfer of the reserve fund to the treasury was criticized also by opposition parties. “They have been preparing to transfer the contingency reserves from CBRT to the Treasury, a reserve kept for hard times,” CHP Vice President and party spokesperson, Faik Öztrak, said. “I have difficulties understanding how much longer will they harm this economy. It is a contingency reserve the CBRT is taking aside from its earnings to use in hard times. We will see what kind of regulation they will make to transfer this money. How will they do it? This means only one thing: Making the economy more fragile than it is, leaving CBRT vulnerable with no ammunition to be used for any external shocks.”
IYI Parti: “The worst signal you can give to the markets”
IYI Parti Vice President in charge of the economy and former Central Bank Chair Durmus Yilmaz warned: “Take a team and brief them to come up with the worst communication policy, you can’t do better than this. This will come back to us as higher interest rates and higher inflation. A decree is not the way to do something about this if they plan to do something. There must be a legal regulation.” Pointing out that such a transfer was made in 1995 too, Yilmaz says that the consequences will be hard. “It means the sea has dried out,” Yilmaz said. “What will be the economic consequences? This will increase the money supply and ratchet up inflation. The budget conditions are clear: there is an obvious budget deficit and the measures taken so far is also known. They were all save-theday measures.”
Stating that the reports indicating this transfer would be the worst signal that can be given to the markets, Yilmaz continues: “It is a monetary expansion, it is printing money, nothing else.”