$10 billion are gone
from foreign reserves

Decline was faster than projected

and will lead to ending the peg to the dollar

Foreign currency reserves at the Central Bank (BDL) have declined by $2.3 billion in July, almost four times the $614 million monthly average decline registered since the beginning of the current year. Foreign currency reserves stood at $23.6 billion at the end of July, according to the latest statistics published by BDL.

Last week, the Governor of the Central Bank indicated that ‘available reserves’ are around $19.5 billion, including $17.5 billion in mandatory reserves which BDL will not access to finance trade or shore up the lira exchange rate.

It is not clear how much of the reserves amount is accessible, since BDL had used some of it to lend to some banks.

At this rate, reserves will be fully exhausted in 12 to 18 months, which would lead to a de-facto end of the peg of the lira to the dollar.

The reserves for the last six months of 2019 had declined by almost $200 million.

Goldman Sachs said that the decline is more significantly than expected.

Pressure on the reserves has come from a shrinking but still wide trade deficit of $3.6 billion during the first six months of 2020. Remittances and capital flight have also been identified as contributing to the hemorrhage, as well as daily interventions by BDL on the parallel forex market.

Incoming workers remittances have slightly increased in 2019. In 2020, they were projected by the World Bank to decline by 17 percent.