Industry experts warn that silver imports may have been an attempt to circumvent the quota application and may have resulted in unfair profits.
While gold imports are one of the biggest factors in the widening current account deficit, the new economic administration tried to prevent imports with the quota measure. However, precious metals market experts point to the records broken in silver imports after the quota on gold imports and call for an investigation into whether the import quota was bypassed with silver.
In order to prevent the Turkish economy from facing the threat of twin deficits, the new economic administration has taken measures to reduce both the budget and the current account deficit. In the budget, tax increases in July and the transfer of the foreign currency protected accounts (KKM) burden to the Central Bank provided relief, while on the current account deficit side, balancing was tried to be achieved by introducing a quota on gold imports.
However, despite the quota, gold imports resumed an upward trend in the last two months. What is also noteworthy is that silver imports hit an all-time high. Precious metals market sources warn that the quota on gold imports may have been breached by silver imports and unfair gains may have been made.
The high volume of gold imports stands out as an important variable in the improvement of the current account balance. Treasury and Finance Minister Mehmet Simsek frequently raises this issue. After the new economic administration took office, quotas were imposed on gold imports. On August 7, after the import quota was introduced, jewelry exporters stated that they had difficulties in accessing raw materials and could not find gold to process and asked the Central Bank and the economic administration for a solution.
Quota loosened for jewelry exporters
The quota imposed on gold imports in August was relaxed in early September following the demands of the members of the Jewelry Exporters’ Association. In order to allow jewelry exporters to access raw materials, quotas were allocated to Ziraat Bank and Vakıf Participation Bank. Exporters can apply to the two banks within the first 5 business days of the month by submitting the amount of unprocessed gold they want to buy together with the Customs Declarations regarding the jewelry exports realized in the previous month.
The gold needed by banks and exporters is supplied under the same conditions as international markets. The quota, which started to be implemented at the beginning of August, aimed to reduce gold imports, which broke a monthly record of 68.33 tons during the year. With the introduction of the quota, gold imports, which were 38.14 tons in July, dropped to 21.22 tons in August and 15 tons in September, according to Borsa Istanbul data. However, it started to rise again in the following months, reaching 23.18 tons in October and 22.31 tons in November.
Silver imports at historical record
While gold imports were trying to be balanced with the quota, a remarkable development took place in silver imports. According to Borsa Istanbul data, after August, when the quota on gold imports came into effect, silver imports started to hit record highs. Silver imports totaled 206.8 tons in September, 131.4 tons in October and 188.1 tons in November, the highest imports in history. While 833.9 tons of silver was imported in 2022, silver imports in the 11 months of this year reached 990.83 tons.
These data attracted the attention of both the economic administration and precious metal market experts. According to the information provided by precious metals market experts, while silver bullion imports have reached 1000 tons, it is questioned whether there is so much production in terms of jewelry and household goods in response to this import. Stating that this is difficult to determine, experts point out that the situation, which raises important question marks, is in need of explanation. According to experts, the amount of imports is shown as exports of silver jewelry or silver household goods and gold is imported by using the cost advantage provided to exporters with the foreign currency corresponding to these exports.
Precious metals market sources claimed that due to the quota application on gold imports, the domestic market price is 50-55 dollars/ounce or 2500 dollars/kilogram higher than the foreign market price, and that large profits are made by using the export of finished silver products to import gold bars.
Market experts pointed out that this import method may be the reason for the decline in the difference between the foreign and domestic market price of gold from 2500 dollars/kilogram to 1250 dollars/kilogram for about two months. Sources said that due to the decrease in gold imports due to the approach of the end of the year, the difference between the domestic market price of gold and the foreign market price has been 2500 dollars/kilogram these days, and that the abolition of the quota imposed on gold imports could prevent bypass transactions in this regard and thus prevent unfair gains of some people.
11-month gold imports exceed last year’s total
According to BIST data, 264.84 tons of gold was imported in 2022. While imports started the year at low levels, they exceeded 40 tons towards the end of the year. In the first months of 2023, gold imports rose to 68.33 tons in January, 57.4 tons in February and 21.7 tons in March. This boom in imports prompted the Central Bank to issue a regulation, which was introduced at the end of February and stipulated that gold imports could only be carried out by the CBRT and precious metal intermediary institutions. This regulation brought imports down to 22.67 tons in March and 2.88 tons in April, but imports started to increase again in May, the month of elections. Gold imports rose to 13.42 tons in May, 19.3 tons in June, 38.14 tons in July and 21.22 tons in August. In early August, the new economic administration introduced a quota on gold imports and gold imports dropped to 14.96 tons in September, but 23.18 tons were imported in October and 22.31 tons in November. Despite all the measures taken, gold imports increased by 14.4 percent to 302.9 tons in the 11 months of 2023 from 264.84 tons in the whole of last year. According to data from the Turkish Statistical Institute, non-monetary gold imports rose to USD 26.88 billion in 10 months of this year, which was USD 20.44 billion in 2022. The current account balance excluding gold fell from a surplus of USD 2.2 billion in October last year to a surplus of USD .4 billion in October this year.
Each gold import regulation brought a record in silver imports
According to BIST data, 990.83 tons of silver was imported in 11 months. In the whole of last year, imports were 833.99 tons. The records seen in monthly silver imports after the quota on gold imports are remarkable. First, silver imports peaked at 123.15 tons in March. In March, the CBRT had put into effect the regulation on gold import permits. The second sharp rise occurred after the quota was put into effect in August. In September, 106.80 tons of silver was imported. In October, the record was renewed with 131.4 tons and in November, an unprecedented level of 188.1 tons of silver was imported.
Normalization of gold imports for sustainable current account deficit
Treasury and Finance Minister Mehmet Simsek frequently draws attention to gold imports. Simsek pointed out that gold imports should be taken under control in order to reduce the current account deficit and to ensure that the current account deficit is on a more sustainable path, and said that gold imports, which have averaged 8 billion dollars in the last 20 years, were 30 billion dollars in 10 months this year and that this should be normalized. Şimşek also emphasized that the deficit excluding gold in the current account deficit has declined to 2 percent of national income and that if gold imports normalize, sustainability in the current account deficit will be achieved.
