Did $732 million dollars knock our pants off?

Remember the dollar skyrocketing against the lira on August 10? Even though the lira rebounded a bit afterwards, it is still at a worse level than the end of July. And we associated this climb only with non-residents taking their money out…But we looked for it and there wasn’t a massive foreign exchange outflow.

According to latest data from the Central Bank, non-residents sold $11 million in stocks and $721 million of government debt securities, so $732 million in total.

Who can argue that the Turkish economy experienced a fluctuation just because $732 million flew out.

If an economy of $800 billion can experience such volatile days just over $732 million, there is a huge problem here. We should look for another reason for the source of the problem. The fundamental reason is skyrocketing foreign exchange rates, but the environment for it we created domestically.

I’m not saying anything new. We have faced such sharp increases in foreign exchange rates since the Turkish private sector’s foreign debt started to grow. The real sector had a foreign exchange open position of $216 billion as of end of June. As long as this figure remains at this level, we will continue facing foreign exchange rate rises. There is no escape from that.

How can we spur a foreign exchange inflow?

When non-residents don’t bring foreign exchange, even a little move on foreign exchange rates affects the whole real economy and there is a rush to buy foreign exchange. Therefore, what’s needed are measures that prevent the real sector from flowing into foreign exchange. That is not possible simply through verbal warnings. Action has to be taken.