There has recently been a dramatic rise in the inflow of unrecorded funds into Turkey, as the official figures have showed. Turkey’s capital inflows of an unknown origin reached $4.3 billion in February, the highest level since September 1998. The problem is with the non-transparent nature of this money, which could undermine the investors’ confidence in the economy. The announcements from members of the government are, however, far away from making sound explanations about where this money is coming from and why the unrecorded funds have been rising.
Between 1992 and 2002, we saw around $3.5 billion from unknown sources leave Turkey. Yet a total reversal followed in the years under Justice and Development Party (AKP) rule. Between 2003 and 2013, around $30 billion entered Turkey. The total amount from mystery sources has reached around $35 billion over the last decade.
It is actually required for the government to clarify where this mysterious money comes from.
Unusual increases in the net errors and omissions items of the balance of payments of a country make an outlook blurred, as many economists agree.
While the rise in this item has been under the scope, some unclear statements were made by the government.
For instance, money coming from the Middle East and the Balkans is finding a “safe haven” in Turkey, which may partly explain the phenomena, Turkey’s Customs Minister Nurettin Canikli told daily Hürriyet earlier this month.
Economy Minister Nihat Zeybekci said it is unavoidable for a country where more than 30 percent of the economic activities are off-the-books to attract such high amounts of unrecorded funds, urging steps to improve the formal economy across the country.
“I might be using the wrong words, but I believe that the higher net errors and omissions actually show our potentials in the economy,” Zeybekci said, as quoted by Anadolu Agency this week.
According to the official definitions, the net errors and omissions increase when there is a difference between the delivery date of the exports and the charging of money for these exports, when there are errors in the customs notifications, when there is unrecorded data about the economic transactions and/or when there are difference between the surveyed economic data and the actual data.
In January, the reverse thing happened and around $1.4 billion of unrecorded funds left the country. The point is here to clarify where these unrecorded funds come from or go to in a much more transparent manner, as some other imbalances are the case in the country’s current account balance.
Otherwise, Turkey will not enjoy the latest decreases in the current account gap amid rising concerns over transparency.