Why did the International Finance Institute raise the fair value estimate for the dollar / TL to 9.50?

The International Finance Corporation (IIF), which raised its fair value estimate for USD / TL from 7.50 to 9.50, listed two main reasons as an increase in the current account deficit and the outflow of foreign hot money. “The reserve could have been a buffer, but at a lower level,” the IIF said.

Spokesman Emre Deveci newsWhy the IIF has long maintained the fair value estimate for the dollar / TL at 5.50, 6.30 on April 6, 2020, 7.50 on June 29, 2020, and 9.50 on May 2, 2021. ”. This figure refers not to the forecast that a ratio will rise to this level in a certain period of time, but to the level of exchange, which is necessary to close the current gap in the current economic situation in Turkey.

The IIF pointed out that there are two main reasons behind the 9.50 decision.

The first is that the current account deficit is higher than previously expected. The agency raised its current open forecast for 2021 to 3 to 4 percent of national income. In 2020, the current account deficit was $ 36.7 billion. In February 2021, the 12-month current account deficit rose to $ 37.8 billion, despite relatively strong economic activity and rising commodity prices, despite rising interest rates and a slowdown in credit.

The second main reason given by the IIF is that the inflow of foreign capital to Turkey is much weaker than expected, and even serious flows have occurred since mid-March.

For these two main reasons, the IIF argues that the dollar / TL balance sheet level needs to be higher in order to increase exports and improve the outlook for the current account deficit.

$ 9.9 billion overseas in the last two months

In fact, data from the Central Bank (CBT) show that foreigners had a net inflow of about $ 9.9 billion in March and April. $ 2 billion of this product was sold through the bond and stock markets, and $ 7.9 billion through the exchange channel. Thus, the total external outflow of securities and swap channels in the first four months of the year amounted to $ 6.9 billion.

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