Turkey's central bank has admitted that much of its currency reserves are held in short-term swap contracts.
Turkey's central bank admitted that it has boosted its foreign currency reserves with an"off balance sheet" arrangement.
Turkey published foreign currency reserves of $28 billion recently, lower than analyst expectations. But some $12 billion of that is in the form of short-term borrowed money,"... the central bank confirmed that dollars borrowed in the first part of these transactions are added to the balance sheet. The obligation to later repay the dollars is recorded as an 'off balance sheet item'.
Countries like Turkey use foreign currency reserves to cover debt denominated in dollars, and for international trade. They back their own currencies with the ability to buy it in foreign currency, in other words. Simply put, countries with lower foreign reserve totals are riskier than those with higher levels. Using swaps instead of currency as a central bank reserve is extremely unusual.
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