BY ALAATTIN AKTAS
It is enough to look at the balance of payments to see what is expected from Treasury and Finance Minister Mehmet Simsek and Central Bank Governor Hafize Gaye Erkan.
The Central Bank’s balance of payments data for April revealed the inevitableness and necessity of finding fresh foreign exchange (FX).
CAD reached nearly USD 5bn in April, USD 30bn in January-April, and USD 58bn in the last year. The deficit could be posted as funding had been provided before.
The wrong expression of “what if we can’t finance” is what the resources are, and therefore the quality of financing.
The financing quality of CAD has been bad for a long time. Improving the financing quality of CAD is expected from Simsek and Erkan.
What matters is not to post CAD and be relied on FX abroad. But it is impossible for Turkey even in the medium term. So, healthy financial resources must be found.
Attracting foreign direct investment (FDI) is necessary. There is FDI; investors come to Turkey and acquire a facility built in Turkey. There is FDI; investors come to Turkey, build a facility from scratch, produce, and create jobs. It is the best one. But there hasn’t been such an FDI inflow lately.
There is also FX from real estate sales, which we show under the FDI item. FX inflow to Turkey through real estate sales totaled USD 232m in April, USD 1.6bn in January-April, and USD 6.2bn in the last year. The FDI amounted to USD 1.9bn, while real estate sales totaled USD 1.6bn in January-April.
Portfolio investment is followed by FDI. But we completely forgot about it.
The portfolio outflow totaled USD 1.2bn in April, USD 1.5bn in January-April, and USD 9.6bn in the last year.
There is CAD, but there is no FDI and portfolio inflow. Borrowing comes up next.
The borrowing totaled USD 1.4bn in April, USD 13.7bn in January-April, and USD 42.6bn in the last year. We cannot stipulate when we borrow that much. The lender almost dictates the conditions. Of course, the interest rate is very high.
We must use the reserves which weren’t held by the Central Bank when borrowing isn’t enough.
Simsek and Erkan can’t reduce the CAD. It isn’t expected from them. And this is not their duty. Simsek and Erkan are expected to improve the financing of the balance of payments. This expectation isn’t related to FDIs. Portfolio investment inflow and borrowing in better conditions are expected from them.