What if non-residents don’t bring FX?

Dunya Executive - - COMMENTARY -

The main reason behind the sharp depreciation of the Turkish lira had nothing to do with what Turkey did or did not do. There is no doubt that Turkey has many deficiencies; there are many steps that need to be taken. It is actually because of these deficiencies that we lead among countries worst effected by global tensions. But we are not the main factor in this increase, let’s accept this. As the exchange rate slows down and even goes back a little bit, we should not relax and and fall into the “Everything is all right” trap.

Don’t relax, as we will face selfmade problems once these tensions go away in the coming days.

I wrote in my column last week while exploring the financial items of the balance of payments that there was a net outflow in February. On top of that, foreign exchange did not come through direct investment and portfolio investment.

We know the portfolio investments in March: the outflow continued. According to the Central Bank’s data, non-residents took out a net worth of $459 million in March, by selling stocks and government debt securities. The net inflow for the first three months was only $470 million. Now we also know the details of capital flows from the first week of April. Non-residents made net sales of $56.5 million in stock and $242.2 million in government debt. So the net outflow was $298.6 million dollars. That means the net foreign exchange amount brought by non-residents until April 6 starting from January 1, was only $171 million.

Down from $1.9 b ll on to $171 m ll on

It is absolutely not an adequate volume of foreign exchange! The only source of funding is not stock and DIBS for sure, but these items are also important.

When considering that non-residents made purchases of net $1.9 billion in stocks and government securities in the same period last year, it is easier to understand how far we have come.

The Trump effect will pass or will ease at least. But there are so many other problems that we need to take care of. Otherwise, if the foreign currency inflow is onetenth of last year, we will see many more record levels in foreign exchange rates.

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