The new president takes over the empty vault

Hafize Gaye Erkan became the new president of the Central Bank (CBRT). However, Erkan is taking over an institution with an empty vault. Appointed president of the Central Bank on March 19, 2021, Şahap Kavcıoğlu nearly emptied the bank’s safe and consumed its resources during the 2-year and 3-month period he was in office. Erkan, who is expected to bring confidence to international markets, took office as Central Bank president with a reserve of minus $75.4 billion. Kavcıoğlu, on the other hand, was rewarded for his “harmonious work” with President Tayyip Erdoğan and was appointed chairman of the Banking Regulation and Supervision Agency (BDDK).

Hafize Gaye Erkan, who is seen as the name that will return the CBRT to “rational” policies, has assumed the presidency of the Central Bank, whose net reserves bottomed out at minus 5.7 billion dollars as of yesterday. CBRT’s net reserve, excluding swap (swap/borrowed money), also fell to a record low of minus $61.2bn last week. When we deduct Treasury liabilities from the bank’s net reserves, excluding swaps, the net reserve comes out at minus $75.4 billion.

$30 BILLION Spent

During his CBRT presidency, Kavcıoğlu mobilized reserves to keep exchange rates exploding with interest rate cuts. Kavcıoğlu’s interventions in the market to maintain exchange rates are estimated to have amounted to $177 billion. The reserves used to keep the dollar below 20 lira just before the elections are estimated to be as high as $30 billion. The bank, whose reserves have been completely depleted, has recently started using its warehouse accounts. $13.7 billion has been transferred to CBRT deposit accounts since the beginning of the year, with hidden currency transfers estimated to come from Gulf countries.

TICKETS ARE SOLD OUT

Thus, it is estimated that the CBRT’s debt with foreign banks, together with the money deposited in their foreign currency deposit accounts, reaches 22.6 billion dollars. Having mobilized all his resources for the election, Kavcıoğlu also used the cash notes in his safe. According to CBRT data, the stock of FX notes decreased to $2.9 billion as of June 2. One of the goals that Kavcıoğlu mentioned frequently during his tenure was to run a current account surplus, but a record current account deficit was set.

The current account deficit, which broke the monthly record with 9.9 billion dollars in January of this year, is close to its historical maximum with 54.2 billion dollars annually as of March. As a result of the strategy that Kavcıoğlu called liraization, the share of foreign currency accounts and foreign currency indexed accounts in total deposits reached 65 percent.

Who is Gaye Erkan?

– Being the first female president of the CBRT, Erkan worked in senior positions in the banking sector in the US. According to her LinkedIn profile, Erkan, who held senior positions at First Republic Bank between 2014 and 2021, had previously spent about 10 years at Goldman Sachs. Erkan, who was most recently on the Marsh McLennan Board of Directors, received his PhD from Princeton University in her educational life after Boğaziçi University. Erkan completed two training programs in management sciences at Harvard Business School and leadership at Stanford University.

CBRT sold 96 tons of gold in 2 months

According to data from the World Gold Council, the Central Bank (CBRT) sold 80.8 tons of gold in April, after selling 15.3 tons in March. Thus, 96 tons of gold were sold in the last two months. In April, there was a 71-tonne decline in central bank gold reserves around the world. The World Gold Council reported that the decrease was due to the sale made by the CBRT. The report indicated that these sales were made to respond to domestic demand.

KAVCIOĞLU HANDED THE MISSION TO ERKAN
Hafize Gaye Erkan assumed the presidency of the Central Bank of Şahap Kavcıoğlu yesterday. He thanked the outgoing president…

Inflation hit a record in the Kavcıoğlu era

Şahap Kavcıoğlu went from 7.28 lira to 23.50 lira during his 27-month term. Inflation, which was 16.19 percent, climbed to all-time highs with 85.5 percent. Although he claimed to support production and growth with his low interest policy, he lowered the policy rate from 19 percent to 8.5 percent in this period. However, while lending and deposit rates peaked in the same period, the foreign exchange taps were turned off for industrialists. Exporters were required to give 40 percent of foreign exchange to the CBRT. While the independence of the CBRT was completely over, the dual exchange rate system that emerged on foreign exchange and interest turned money markets upside down.