Turkey is not a safe place for investors Turkey’s current economic situation is dire. The country is heavily indebted to international investors — to the tune of $451 billion, according to the latest data.1 The short-term external national debt is $185.3 billion.2 Due to high energy and commodity prices, exacerbated by Russia’s invasion of Ukraine in late February 2022, Turkey has a persistent current account deficit, although depreciation of the local currency has not reduced this. This means the higher cost of imported goods has not curbed demand sufficiently and the lower cost of the Turkish labor force has not provided domestic industry with enough of a competitive advantage to improve the current account deficit.
Mega-projects built through public-private partnerships (PPPs) have created additional conditional liabilities estimated at around $160 billion. The net official reserves held by the Central Bank of the Republic of Turkey (CBRT) when swap agreements are removed declined to $-52.3 billion in 2022, down sharply from $71.1 billion in 2011.3 The Treasury and the CBRT have also introduced a costly mechanism to provide foreign exchange (FX) protection and guarantees for Turkish lira (TL) deposit account holders; as of late September 2022, FX-protected deposits totaled around $75.34 billion.4