Turkey’s trade deficit surged 75% year-on-year in March to $8.17 billion, mainly due to a 30.7% rise in imports, data showed on Friday.
According to the Turkish Statistical Institute, exports climbed by 19.8% to nearly $22.71 billion versus imports of around $30.88 billion.
Turkey has launched a new economic program aimed at achieving a surplus in the current account balance by increasing exports while maintaining low interest rates, albeit at the expense of inflation, which has hit record highs.
The Turkish central bank revised up its inflation forecasts for this year and next mainly because of the rise in commodity prices and supply issues.
A presentation by Governor Sahap Kavcioglu on Thursday showed inflation peaking around 70% before June and falling to single digits by end-2024.
Export-driven growth and current account balance are important for price stability, Kavcioglu said, adding that Turkey’s economy is seen expanding seven percent in Q1 2022.
Meanwhile, Turkey is working on a plan to attract inflows of hard currency by offering lira funding, free of interest and with a guaranteed four percent return in dollars, to foreign investors willing to park their money for at least two years.
Under the plan, the central bank would provide lira liquidity to foreigners for investment in local bonds with a maturity of at least two years, according to a person with direct knowledge of the deliberations.
Besides extending zero-yield swaps, the monetary authority would also guarantee a four percent return in dollar terms when the securities mature, the person said.
After a currency crisis in 2018, Turkey introduced numerous restrictions on foreign transactions to defend the lira, placing limits on swaps with local banks to deter short sellers.
But as a side effect, foreign holdings of Turkish stocks and bonds have fallen to a historic low.
Deep trade imbalances and the world’s most negative, price-adjusted interest rates have increasingly put the $800 billion economy at risk as global tightening escalates, led by the US Federal Reserve.
Instead of using higher interest rates to make lira assets more attractive, Turkey has introduced a series of unconventional policies to attract hard currency and boost central bank reserves.
Deposits in hard currency protected accounts reached 782 billion lira ($52 billion) as of April 22, according to banking watchdog data.
The central bank also reviewed this month some of the reserve requirements controls at banks in an attempt to encourage the conversion of foreign currencies into the local currency.
