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Turkish central bank will continue to increase forex reserves

Sahap Kavcioglu said the central bank was prioritising steps aimed at removing structural causes of high inflation Reuters/Umit Bektas
The central bank governor Sahap Kavcioglu has stood by previous year-end annual inflation forecasts

Turkey’s central bank will continue increasing its foreign currency reserves, its governor Sahap Kavcioglu said on Friday.

Forex reserves have dropped sharply in recent years due to market interventions and in the wake of a currency crisis last December. The lira lost 44 percent of its value against the US dollar last year and another 29 percent this year.

Recent central bank data has shown a recovery in reserves after they touched 20-year low in July.

Speaking in parliament, Kavcioglu also said a scheme that protects lira savings against foreign currency fluctuations helped increase the share of lira deposits in the financial system and would not harm the balance sheet of the central bank.

Exchange rate stability was now achieved, Kavcioglu said, adding that the central bank was prioritising steps aimed at removing structural causes of high inflation, currently running at a 24-year high of 85.51 percent.

Turkey’s economy expanded 3.9 percent in the third quarter from a year ago, according to official data released last week.

However, growth slowed from the previous quarter as a global slowdown put a drag on exports, but the tourism sector remained strong.

Gross domestic product (GDP) contracted 0.1 percent from the previous quarter on a seasonally and calendar-adjusted basis, data from the Turkish Statistical Institute showed, marking the first contraction since the height of the Covid-19 pandemic in the second quarter of 2020.