BY ALAATTIN AKTAS
The net errors and omissions (E&O) are the soft underbelly of the balance of payments. Whether positive or negative, its high course is a problem and shows the size of the FX inflow and outflow.
Turkey held critical elections in May. A silent move reflected in the net E&O started. The net E&O, which generally had a positive course, significantly fell into the negative zone. There was a money outflow with an unknown origin. If the Central Bank knew that, it would include it in the relevant items.
The outflow, which reached USD 2.7bn in March, USD 3.4bn in April, and USD 8.7bn in May, totaled USD 14.9bn in March-May.
The money exceedingly flew back after the People’s Alliance won the elections. Apparently, those who preferred to withdraw the money could breathe easily again.
The inflow, which amounted to USD 8bn in June, USD 3.6bn in July, and USD 4.6bn in August, totaled USD 16.2bn in June-August.
If the Nation Alliance had won the parliamentary and Presidential elections, the regime wouldn’t have changed in Turkey; there would have been a transition to the parliamentary system at most, and who knows how long it would have taken for that to happen.
What was the fear caused by the government change alone? Who was afraid? Why did those people or institutions take their money abroad and bring it back?
The net E&O is the adjustment item of the balance of payments. That’s the technical explanation. But that won’t be enough to explain what happened in March-August. That is an unprecedented case.
Some people chose to secure their money and took it abroad, thinking that something would happen to their money as they were afraid of the government change. Then they returned happily when the development they were worried about didn’t happen.
Was that money earned illegally to pave the way for those outflows and inflows? That is the question to be answered.
The 2024-2026 Medium-Term Economic Program (OVP) forecasted the current account deficit (CAD) at USD 42.5bn for 2023. The August reading released by the Central Bank showed that the 8-month CAD exceeded the OVP forecast for the entire year. The 8-month CAD hit USD 43.1bn. The CAD can be low in the remaining four months and total USD 42.5bn with a surplus in the current account balance. But that doesn’t happen under normal conditions.