In a strategic move to bolster macro-financial stability and enhance the monetary transmission mechanism, the Central Bank of Turkey announced on Saturday an increase in reserve requirement ratios for short-term lira-denominated funding sourced from abroad.
This policy adjustment comes amid efforts to restore confidence in the Turkish financial system and follows a notable $6 billion rise in the central bank’s gross reserves, reversing several weeks of decline.
Key Changes in Reserve Requirements:
-
For maturities up to 1 month: Raised from 12% to 18%
-
For maturities up to 3 months: Increased to 14%
These changes primarily affect lira-denominated funds obtained via foreign repo transactions, aiming to discourage short-term speculative inflows and stabilize the currency markets.
The move is in line with broader efforts by Turkish authorities to manage inflationary pressures, attract longer-term investments, and reduce vulnerabilities in the external financing structure.
This increase in reserve requirements is expected to tighten short-term liquidity, making short-term borrowing more costly, and potentially strengthening the Turkish lira.
