Turkiye’s forex reserves turn negative ahead of critical runoff vote

The Turkiye central bank’s net foreign exchange reserves turned negative for the first time since 2002. (Reuters/File Photo)
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Updated 26 May 2023
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Turkiye’s forex reserves turn negative ahead of critical runoff vote

  • ‘Govt to blame for using monetary policy to win polls’
  • Winner must address inflation, debt, lira’s value, say experts

ANKARA: As Turkiye heads to a critical runoff vote to determine the nation’s president on Sunday, the central bank’s net foreign exchange reserves turned negative for the first time since 2002, dropping to minus-$151.3 million on May 19, due to increased market demand since the first round of the elections.

Experts say the current course in Turkiye, one of the world’s 20 largest economies, is connected to the controversial efforts of the incumbent government to win the elections by trying to hold the Turkish lira relatively steady with unorthodox policies and low interest rates amid high inflation.

However, keeping interest rates low also bears risky consequences despite its short-term advantages.

Selva Demiralp, a professor of economics at Koc University in Istanbul, said: “The central bank’s foreign currency reserves are meant to be a buffer during times of temporary volatility. They are not supposed to be used as a monetary policy tool in a free exchange rate system, simply because they are of limited supply.”

“Turkiye’s central bank has done the latter, however, and tried to offset the adverse effects of a low interest rate environment on the exchange rate by selling foreign currency reserves. As of now, these reserves are mostly depleted with gross reserves of around $100 billion and net reserves are close to (zero). After adjusting for swap agreements, the net reserves become deeply negative around (minus) $60 billion,” she told Arab News.

For an economy with a monthly current account deficit of around $8 billion, Demiralp thinks that the negative value of net reserves is alarming because it can cause disruptions in trade, considering that Turkiye relies on imports of intermediate goods in its production structure.

“Hence potential disruptions in supply chains due to lack of foreign exchange would not only affect Turkish production but would also affect the production of our trade partners in today’s global production network where most countries are interconnected through supply chains,” she said.

“Because the presence of foreign investments in Turkiye is rather minimal at the moment, it would not make much of a change regarding the foreign investors’ hesitance about entering Turkish markets. The decline in reserves and the consequent increase in Turkiye’s risk premium would increase the external borrowing costs of the domestic investors, however,” Demiralp said.

There are still uncertainties over whether the new government will stick with the current economic program of encouraging exports and economic growth with rate cuts and strictly monitored foreign exchange markets, or switch to another model with gradual interest rate hikes.

Kemal Kilicdaroglu, the opposition’s contender against President Recep Tayyip Erdogan, has promised a return to orthodox and investor-friendly economic policies with rate hikes.

However, even if he comes to power, the parliamentary majority will still be in the hands of Erdogan’s Justice and Development Party and its alliance, which will restrict the ability to manage a new financial program.

Sky-high inflation rates reaching 44 percent and depleted foreign reserves still pose significant challenges. The country will also face local elections next March that requires the need to sustain economic stability for some time.

However, Erdogan recently told CNN he would not change his economic policy if he wins a third presidential term. This means the currency might sink further, while more restrictions might also be placed on foreign currency withdrawals.

Economist Demiralp believes that the likely scenario after the elections is a gradual hiking of rates to ease the pressures on the foreign exchange market and encourage capital inflows.

“This goes against the signals and the guidance by government officials. Nevertheless, the alternative to the orthodox policies is stricter capital controls and I believe the costs of that route would far outweigh the costs of a tightening cycle on the Turkish economy,” she added.

The national currency continues slipping to record lows against the euro and the US dollar. It has lost almost 80 percent of its value against the dollar over the past five years.

Russia recently agreed to delay some of Turkiye’s payment for natural gas imports — a $600-million bill — to next year, while in March Saudi Arabia deposited $5 billion in Turkiye’s central bank.

Following Sunday’s elections, among the winning side’s top priorities would be to address skyrocketing inflation and the plummeting lira.

Emre Akcakmak, a Dubai-based senior consultant at East Capital, said that regardless of the winning candidate, there are several issues that the new government must address urgently.

“The central bank’s declining net international reserves, growing short-term external debt, large current account deficit, high inflation, and a massive pile of foreign currency-protected deposits are just a few of the many,” he told Arab News.

According to Akcakmak, although the net international reserves have fallen into negative territory, the central bank still has some room to delay major action, considering the usable gross reserves.

“However, time is ticking away, and potential troubles are deepening as long as there is no decisive policy response,” he said.

The incumbent government of Turkiye has long rejected any suggestion of a rescue package from the International Monetary Fund as an external solution to its financing needs, and reaching an agreement with the IMF is still not on its agenda.

“There is a lot of talk about the IMF as an external solution, but the reality is that the international reserves are already supported by external sources, given significant foreign central bank swaps and deposits,” said Akcakmak.

“A solution should ultimately come from within, with a strong and comprehensive policy response that takes a long-term view, rather than solely addressing the immediate challenges,” he added.

In April, the IMF raised Turkiye’s economic growth forecast to 3.6 percent for next year but lowered the country’s economic growth forecast for this year to 2.7 percent.


A look at the terms — and tensions — in the Israel-Hamas draft ceasefire deal

Updated 15 January 2025
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A look at the terms — and tensions — in the Israel-Hamas draft ceasefire deal

  • In the first week, troops would withdraw from the main north-south coastal road — Rasheed Street — which would open one route for Palestinians returning. By the 22nd day of the ceasefire, Israeli troops are to leave the entire corridor
  • During the first phase, Hamas is to release 33 hostages in exchange for the freeing of hundreds of Palestinians imprisoned by Israel

CAIRO: If the Israel-Hamas ceasefire deal goes according to the current draft, then fighting will stop in Gaza for 42 days, and dozens of Israeli hostages and hundreds of Palestinian prisoners will be freed. In this first phase Israeli troops will pull back to the edges of Gaza, and many Palestinians will be able to return to what remains of their homes as stepped-up aid flows in.
The question is if the ceasefire will survive beyond that first phase.
That will depend on even more negotiations meant to begin within weeks. In those talks, Israel, Hamas, and the U.S, Egyptian and Qatari mediators will have to tackle the tough issue of how Gaza will be governed, with Israel demanding the elimination of Hamas.
Without a deal within those 42 days to begin the second phase, Israel could resume its campaign in Gaza to destroy Hamas – even as dozens of hostages remain in the militants’ hands.

Humanitarian aid sits, waiting to be picked up on the Palestinian side of the Kerem Shalom aid crossing in the Gaza Strip, on Dec. 19, 2024. (AP)

Hamas has agreed to a draft of the ceasefire deal, two officials confirmed, but Israeli officials say details are still being worked out, meaning some terms could change, or the whole deal could even fall through. Here is a look at the plan and potential pitfalls in the draft seen by the Associated Press.
Swapping hostages for imprisoned Palestinians
During the first phase, Hamas is to release 33 hostages in exchange for the freeing of hundreds of Palestinians imprisoned by Israel. By the end of the phase, all living women, children and older people held by the militants should be freed.
Some 100 hostages remain captive inside Gaza, a mix of civilians and soldiers, and the military believes at least a third them are dead.
On the first official day of the ceasefire, Hamas is to free three hostages, then another four on the seventh day. After that, it will make weekly releases.
Which hostages and how many Palestinians will be released is complicated. The 33 will include women, children and those over 50 — almost all civilians, but the deal also commits Hamas to free all living female soldiers. Hamas will release living hostages first, but if the living don’t complete the 33 number, bodies will be handed over. Not all hostages are held by Hamas, so getting other militant groups to hand them over could be an issue.

Palestinians inspect the rubble of the Yassin Mosque after it was hit by an Israeli airstrike at Shati refugee camp in Gaza City, on Oct. 9, 2023. (AP)

In exchange, Israel will free 30 Palestinian women, children or elderly for each living civilian hostage freed. For each female soldier freed, Israel will release 50 Palestinian prisoners, including 30 serving life sentences. In exchange for bodies handed over by Hamas, Israel will free all women and children it has detained from Gaza since the war began on Oct. 7, 2023.
Dozens of men, including soldiers, will remain captive in Gaza, pending the second phase.
Israeli pullbacks and the return of Palestinians
During the proposed deal’s first phase, Israeli troops are to pull back into a buffer zone about a kilometer (0.6 miles) wide inside Gaza along its borders with Israel.
That will allow displaced Palestinians to return to their homes, including in Gaza City and northern Gaza. With most of Gaza’s population driven into massive, squalid tent camps, Palestinians are desperate to get back to their homes, even though many were destroyed or heavily damaged by Israel’s campaign.
But there are complications. During the past year of negotiations, Israel has insisted it must control the movement of Palestinians to the north to ensure Hamas does not take weapons back into those areas.
Throughout the war, the Israeli military has severed the north from the rest of Gaza by holding the so-called Netzarim Corridor, a belt across the strip where troops cleared out the Palestinian population and set up bases. That allowed them to search people fleeing from the north into central Gaza and bar anyone trying to return.
The draft seen by the AP specifies that Israel is to leave the corridor. In the first week, troops would withdraw from the main north-south coastal road — Rasheed Street — which would open one route for Palestinians returning. By the 22nd day of the ceasefire, Israeli troops are to leave the entire corridor.
Still, as talks continued Tuesday, an Israeli official insisted the military will keep control of Netzarim and that Palestinians returning north would have to pass inspections there, though he declined to provide details. The official spoke on condition of anonymity to discuss closed negotiations.
Working out those contradictions could bring frictions.
Throughout the first phase, Israel will retain control of the Philadelphi Corridor, the strip of territory along Gaza’s border with Egypt, including the Rafah Crossing. Hamas dropped demands that Israel pull out of this area.
Humanitarian aid
In the first phase, aid entry to Gaza is to be ramped up to hundreds of trucks a day of food, medicine, supplies and fuel to alleviate the humanitarian crisis. That is far more than Israel has allowed in throughout the war.
For months, aid groups have struggled to distribute to Palestinians even the trickle of aid entering Gaza because of Israeli military restrictions and rampant robberies of aid trucks by gangs. An end to fighting should alleviate that.
The need is great. Malnutrition and diseases are rampant among Palestinians, crammed into tents and short on food and clean water. Hospitals have been damaged and short of supplies. The draft deal specifies that equipment will be allowed in to build shelters for tens of thousands whose homes were destroyed and to rebuild infrastructure like electricity, sewage, communications and road systems.
But here, too, implementation could bring problems.
Even before the war, Israel has restricted entry of some equipment, arguing it could be used for military purposes by Hamas. Another Israeli official said arrangements are still being worked out over aid distribution and cleanup, but the plan is to prevent Hamas from having any role.
Further complicating matters, Israel’s government is still committed to its plan to ban UNRWA from operating and to cut all ties between the agency and the Israeli government. The UN agency is the major distributor of aid in Gaza and provides education, health and other basic services to millions of Palestinian refugees across the region, including in the Israeli-occupied West Bank.
The second phase
If all of that works out, the sides must still tackle the second phase. Negotiations over it are to begin on Day 16 of the ceasefire.
Phase two’s broad outlines are laid out in the draft: All remaining hostages are to be released in return for a complete Israeli withdrawal from Gaza and a “sustainable calm.”
But that seemingly basic exchange opens up much bigger issues.
Israel has said it will not agree to a complete withdrawal until Hamas’ military and political capabilities are eliminated and it cannot rearm — ensuring Hamas no longer runs Gaza. Hamas says it will not hand over the last hostages until Israel removes all troops from everywhere in Gaza.
So the negotiations will have to get both sides to agree to an alternative for governing Gaza. Effectively, Hamas has to agree to its own removal from power — something it has said it is willing to do, but it may seek to keep a hand in any future government, which Israel has vehemently rejected.
The draft agreement says a deal on the second phase must be worked out by the end of the first.
Pressure will be on both sides to reach a deal, but what happens if they don’t? It could go in many directions.
Hamas had wanted written guarantees that a ceasefire would continue as long as needed to agree on phase two. It has settled for verbal guarantees from the United States, Egypt and Qatar.
Israel, however, has given no assurances. So Israel could threaten new military action to pressure Hamas in the negotiations or could outright resume its military campaign, as Prime Minister Benjamin Netanyahu has threatened.
Hamas and the mediators are betting the momentum from the first phase will make it difficult for him to do that. Relaunching the assault would risk losing the remaining hostages — infuriating many against Netanyahu — though stopping short of destroying Hamas will also anger key political partners.
The third phase is likely to be less contentious: The bodies of remaining hostages would be returned in exchange for a 3- to 5-year reconstruction plan to be carried out in Gaza under international supervision.


UN Libya mission alarmed by reported torture footage in detention facility

Guards check on a prisoner at the Kadhafi-era political prisoners jail Ain Zara in Tripoli on November 16, 2011. (AFP file photo
Updated 15 January 2025
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UN Libya mission alarmed by reported torture footage in detention facility

  • The UN mission said the footage was consistent with what it described as “documented patterns of human rights violations in detention facilities across Libya”

CAIRO: The UN Libya mission expressed on Tuesday its alarm over what it said was footage circulating on social media featuring “brutal torture and ill-treatment” of detainees at the Gernada detention facility in eastern Libya.

Reuters was not able to independently verify the location nor date of the footage, however architectural details seen on the videos, including the type of tiles on the floor, the wall painting and cell bars are consistent with file imagery of the prison from corroborating reports.

“As UNSMIL continues to verify the circumstances of the circulated footage, it strongly condemns these acts that constitute serious violations of international human rights law,” it said.

The UN mission said the footage was consistent with what it described as “documented patterns of human rights violations in detention facilities across Libya.”

It also called for an immediate investigation into the accusations, adding that it is coordinating with the General Command of Libyan National Army for “unrestricted access to UNSMIL’s human rights officers and other independent monitors to the Gernada facility as well as other detention centers under their control.”

There was no immediate comment from Libyan authorities regarding the videos or the UN report.
The North African country has plunged into chaos and lawlessness after the toppling of the regime of former dictator Muammar Qaddafi in NATO-backed uprising in 2011.

 

 


UN lays groundwork for Gaza aid surge under ceasefire but still sees challenges

Updated 15 January 2025
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UN lays groundwork for Gaza aid surge under ceasefire but still sees challenges

  • More than 46,000 people have been killed in Israel’s assault on Gaza, according to Palestinian health officials

UNITED NATIONS, United States: The United Nations said on Tuesday it was busy preparing to expand humanitarian assistance to the Gaza Strip under a potential ceasefire but uncertainty around border access and security in the enclave remain obstacles.
Negotiators in Qatar are hammering out final details of a ceasefire between Israel and Palestinian militants Hamas in Gaza, with mediators and the warring sides all describing a deal as closer than ever. A truce would include a significant increase of humanitarian aid into the Gaza Strip.
The UN humanitarian and reconstruction coordinator for Gaza, Sigrid Kaag, met with Israeli and Palestinian ministers in recent days and spoke with the Egyptian foreign minister on Tuesday about UN engagement in a ceasefire, UN spokesperson Stephane Dujarric said.
“The UN system as a whole is in intense planning and preparation for when a ceasefire comes into play, and how we can increase the aid,” Dujarric said.
Among the unknowns are what border crossings would be open into Gaza under a truce and how secure the enclave would be for aid distribution since many shipments have been targeted by armed gangs and looters during the conflict.
“Obviously, things that will continue to be challenging because we don’t have answers to all those questions,” Dujarric said.
The UN has complained of aid obstacles in Gaza throughout the 15-month-old war. The UN says Israel and lawlessness in the enclave have impeded the entry and distribution of aid in the war zone.

’DOING EVERYTHING POSSIBLE’
Global food security experts warned in November there is a “strong likelihood that famine is imminent” in northern Gaza. More than 46,000 people have been killed in Israel’s assault on Gaza, according to Palestinian health officials.
Israel has said the quantity of aid delivered to Gaza — which it puts at more than a million tons over the past year — has been adequate. But it accuses Hamas of hijacking the assistance before it reaches Palestinians in need. Hamas has denied the allegations and blamed Israel for shortages.
The fate of the UN Palestinian relief agency UNRWA — which the UN says is the backbone of aid operations in Gaza — is also unclear as a law banning its operation on Israeli land and contact with Israeli authorities is due to take effect later this month.
Dujarric said the UN and partner organizations are “doing everything possible” to reach Palestinians in need with extremely limited resources.
“However, ongoing hostilities and violent armed looting as well as systematic access restrictions continue to severely constrain our efforts,” he said. “Road damage, unexploded ordinances, fuel shortages and a lack of adequate telecommunications equipment are also hampering our work.”
“It is imperative that vital aid and commercial goods can enter Gaza through all available border crossings without delay, at a scale needed,” he said.
Hamas killed 1,200 people in southern Israel on Oct. 7, 2023, and took some 250 hostages, according to Israeli tallies. Since then, Israel has laid much of Gaza to waste, and the territory’s prewar population of 2.3 million people has been displaced multiple times, humanitarian agencies say.

 


Emirati observation satellite launches successfully from California

Updated 15 January 2025
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Emirati observation satellite launches successfully from California

  • MBZ-SAT was entirely developed by Emirati engineers at Mohammed bin Rashid Space Centre in Dubai
  • Developers say it will enhance disaster-management by capturing high-res images of areas as small as 1 sq. meter

LONDON: The Emirati-developed observation satellite MBZ-SAT successfully launched on Tuesday evening from the Vandenberg Space Force Base in the US state of California.

Described by developers as the most advanced observation satellite in the Middle East, it was carried into space by a SpaceX Falcon 9 rocket, the Emirates News Agency reported.

The satellite was entirely developed by Emirati engineers at the Mohammed bin Rashid Space Centre in Dubai. Final testing by the team ahead of launch took place at SpaceX’s facilities in the US.

Developers said the satellite will enhance disaster-management efforts by continuously capturing high-resolution images that can reveal details in areas as small as 1 sq. meter.


120 civilians killed in artillery shelling in Sudan

Updated 15 January 2025
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120 civilians killed in artillery shelling in Sudan

PORT SUDAN: At least 120 civilians were killed in artillery shelling of western Omdurman on Tuesday as fighting between the Sudanese army and paramilitary forces escalated again.
Rescuers said medical supplies were in critically short supply as health workers struggled to treat “a large number of wounded people suffering from varying degrees of injuries” in the capital Khartoum’s twin city just across the Nile River.
Sudan has been at war since April 2023 between the forces of rival generals. Most of Omdurman is under army control, while the rival paramilitary Rapid Support Forces hold Khartoum North and some other areas of the capital.
Greater Khartoum residents on both sides of the Nile regularly report shelling across the river, with bombs and shrapnel often hitting homes and civilians. Both the army and the paramilitaries have been accused of targeting civilians, including health workers, and indiscriminately shelling residential areas.
Fighting has intensified in recent weeks. Port Sudan, the seat of Sudan's army-aligned government, was without power after a drone attack by the paramilitaries hit a hydroelectric dam in the north.
The war has killed up to 150,000 people, uprooted more than 12 million and pushed many Sudanese to the brink of famine.