75 billion dollars of hot money entering Turkey concerns the economic administration
The 75 billion dollars of hot money directed to Turkey through the high interest rate policy is prompting the economic administration to take new measures against the risk of a potential rapid exit.
While Turkey's pursued high interest rate policy has provided a strong short-term foreign capital flow into Turkish lira assets, the economic administration is evaluating new measures against potential rapid exit risks.
High Interest and Capital Inflow
As a result of the implemented high interest rate policy, approximately 75 billion dollars of foreign capital inflow occurred in the country. This situation accelerated the orientation of short-term funds towards Turkish lira-denominated assets.
Carry Trade and Risks
The policy interest rate at one of the highest levels in the world paved the way for foreign investors to focus heavily on carry trade transactions through foreign exchange derivatives and money market funds.
Tax Option on the Table
It is stated that the economic administration is evaluating the option of introducing a tax on the returns of money market funds in order to limit potential sudden capital movements.
Fund Sizes and Distribution
While the total size in money market funds has reached approximately 3 trillion liras, a significant portion of foreign carry trade investors are located in these funds and foreign exchange futures contracts.