Turkey has been seeing a rise in “mystery money” into its economy.
In fact, capital inflows into Turkey from “unknown origin” in 2015 reached the highest level since its Central Bank started record keeping back in 1975, according to Bloomberg.
Turkey’s Central Bank reported on Thursday that “net errors and omissions” rose to $9.7 billion last year.
Mystery flows are called “net errors” by the Turkish Central Bank, because it is unable to determine where exactly the money came from and how it entered the country.
But where did this money come from?
One can only speculate, especially now amongst the raft of allegations of corruption and illicit actions by President Recep Tayyip Erdoğan and the Turkish government.
One possible cause of the “mystery money” could be the difference between the actual tourism revenue collected and the amount that was estimated by the Central Bank, which relies on surveys conducted by foreign tourists, Bloomberg said.
However, former Customs Minister Nurettin Canikli, says that regional chaos is creating a financial “safe haven” in Turkey.
“It is impossible to see this as a healthy way of financing the deficit,” Finansbank Chief Economist Inan Demir told Bloomberg. “The size of the net errors and omissions shows the difficulty Turkey is facing while it finances the gap in its current-account, even as it shrinks.”
The reason for the increase could perhaps be driven by non-financial companies’ inability to pay back its foreign-exchange debt, due to the lira’s slump or for other reasons, which forced them to repatriate assets through unofficial channels, Demir told Bloomberg.
The announcement by the Turkish Central Bank has spurred fears that the government’s way of financing its current-account gap is unsustainable.
Here’s more from Bloomberg:
The rise in mystery inflows casts doubt over the government’s achievement in narrowing the current-account deficit, considered the economy’s biggest vulnerability in 2013. An improvement in the foreign trade imbalance was key, but as the gap narrowed, financing from mystery funds rose. Combined with foreign reserves sold, they were equivalent to 67 percent of the deficit last year — the highest level since Turkey’s last surplus in 2001.