FX poured in April and we didn’t even notice


The Central Bank’s (CB) balance of payments statistics show that a considerable amount of foreign exchange (FX) flowed to Turkey in April. The FX that entered Turkey was more than needed and the surplus added to the CB’s reserves.

The current account deficit totaled USD 2.7bn in April. There was a higher FX inflow than the CAD. We couldn’t directly determine the source of this FX. More precisely, we don’t know which budget items we had to include this FX in, so we included it in the net errors and omissions. The FX included in this item totaled USD 4.5bn.

Net errors and omissions have already been high this year. These totaled USD 7.2bn in the first quarter.

Net errors and omissions shouldn’t include FX that is coming from an unknown source. It would be more correct to consider it as the FX that isn’t included in a clear category. A significant part of the FX in April will be transferred to relevant budget items and the USD 4.5bn initially announced will decrease. Net errors and omissions are an adjustment item.

For now, an inflow of USD 4.5bn was included in net errors and omissions in April. Moreover, foreign direct investments (FDI) and other investments which mainly consist of borrowing, amounted to USD 323m and USD 1.7bn, respectively.

Portfolio investment outflows, which totaled USD 606m, continued in the finance item.

Thus, the inflow to the gross financial account amounted to USD 1.4bn. The total amount can be counted as USD 5.9bn if USD 4.5bn net errors and omissions are added.

The CAD generated USD 2.7bn of USD 5.9bn, while the remaining USD 3.2bn was added to the CB’s reserve.

Although FX to finance the CAD and to be added to the CB’s reserve flowed in April, we couldn’t feel it. USD/TRY, which averaged 14.57 in March, rose to USD 14.68. The surge wasn’t that big. However, if there wasn’t such a high FX inflow, we would witness a sharper FX rate increase.

We always say that it’s important to look at the big picture.

The annual CAD was USD 13.7bn four months ago in line with the balance of payments figures. The goal was to decrease the CAD and even post a surplus in the current account balance.

But what happened?

The annualized CAD rose to USD 19bn in January. The surge continued. It exceeded USD 22bn in February, reached USD 24.5bn, and exceeded USD 25.7bn at the end of April.

From USD 13.7bn four months ago to USD 25.7bn.

The CAD jumped nearly 90% in four months. That’s some kind of planning.

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