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When a flood of placards and banners bearing the number 128 appeared this month, police quickly threw them out – arguing that President Recep Tayyip Erdogan had offended crime in Turkey.
“Where’s $ 128 billion?” he asked the opposition People’s Republican Party (CHP) about the banners hanging in its offices across Turkey, citing the money the central bank has used to bolster the lira in recent years. Estimates vary widely depending on the amount of spending, and on Wednesday Erdogan had a value of $ 165 billion, the highest valuation to date.
Opposition and other analysts say the mix shows a lack of transparency and poor governance at the heart of Erdogan’s economic policy, which is widely condemned for halting inflation and halting the amortization of the pound.
“What we are asking is a question, but the reaction makes it clear that this is also not acceptable,” said Gokce Gokcen, CHP’s vice president for youth affairs. “This is a basic problem of $ 128 billion in governance in Turkey because the administration lacks transparency and trust. We don’t know if the money was promised to bind the currency, to whom it was sold, left Turkey or were profits,” he added.
For many Turks, the exchange rate is a barometer of economic success, with Ankara expanding its reserves – a central bank’s foreign assets to offset a nation’s liabilities – in a bid to push ahead of the 2019 elections and the 2020 pandemic. It still fell 37 percent against the dollar within 18 months of November 2020.
Critics accuse the bank of hiding the amount sold by avoiding public debt auctions, failing to publish data on interventions, and showing swaps or borrowed funds as assets on its balance sheet. The governor of the central bank said the data is being shared in a “very transparent manner” by international standards. The spokesman declined to comment further.
Erdogan on Wednesday spoke out against CHP charges as a “rag” and a “betrayal” to frighten foreign investors. International reserves now amount to about $ 90 billion and “can be used when needed,” he told party members. Goldman Sachs believes the central bank has negative net foreign assets of $ 60 billion.
Recep Tayyip Erdogan, President of Turkey. Opposition says lack of transparency at the heart of its economic policy © Adem Altan / AFP via Getty Images
Erdogan gave an account of spending for the first time, saying $ 165 billion was spent in the past two years “when Turkey had an unprecedented foreign exchange demand” for the current account deficit, portfolio outflows, designated loans to finance foreign currency and citizen gold and Forex demand.
A self-described “enemy of interest rates,” Erdogan effectively banned political leaders at the time from raising rates to slow double-digit inflation, leaving them with little chance of avoiding a lira amortization.
Erdogan ousted the third central governor in March in less than two years, raised rates more than expected and installed Sahap Kavcioglu, an academic who advocated the use of reserves in the newspaper column. The shake eroded the central bank’s independence further and caused more market turmoil.
“The basic view of the president’s interest rates determines the policy of central banks and there was a political impact on the scale of the destruction of reserves,” said Ugur Gurses, a former economist and central banker. “Fully knowing the extra amounts of foreign exchange that did not stop the amortization of the lira would lead to the acceptance of political failure.”
Global Source Partners consulting analysts Atilla Yesilada and Murat Ucer said it was unlikely that the money was enriched by members of the nearby government or company, but the loss of bank buffers “does not make the situation so serious.”
“These reserves” were “lost in an effort to sustain the unbearable, which will make them one of the worst mismanagement policies in modern economic history,” they wrote in a research note.
Erdogan deplored the “gratitude” he had shown to his son-in-law, former finance minister Berat Albayra, for overseeing the policy of intervention until he resigned in November until the lowest lira was recorded. Three members of the CHP youth have been arrested this year for possessing flyers with the image of Albayrak, saying they were “wanted” in connection with “lost” reservations.
Recent opposition progress seems to have reduced incomes per capita by a third since 2018 in dollars.
The # 128MilyarDolarNerede (#Whereisthe $ 128bn) has been on trend on Twitter and was among the top three searches on Google last week in Turkey.
CHP, out of power for a quarter of a century, has created a website, www.128milyardolar.netUsers try but inevitably don’t spend $ 128 billion “buying” things like food, a coronavirus vaccine, the airport, or the Houston Rockets basketball team. Kemal Kilicdaroglu took his chair to the quiz show Who wants to be a millionaire? With questions criticizing Instagram’s economic policy.
While central banks do not use their reserves to finance government spending, many Turks believe it is public money. “It hurts me to think that money could go to help people during the pandemic, save jobs, and buy more vaccines,” said Ozkan, a 23-year-old hardware salesman who refused to give his last name.
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