Foreign Currency Balance Sheets in Türkiye: Exposure and Interconnectedness

IMF Working Papers, June 23, 2023

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Canonical URL: Foreign Currency Balance Sheets in Türkiye: Exposure and Interconnectedness

Author: Alex Pienkowski
Date: June 23, 2023
Series: Working Paper No. 2023/132
Pages: 15
Core summary: As a heavily “dollarized” economy, large foreign currency mismatches exist between institutional sectors within Türkiye, as well as with non-residents. Combining several separate data sources, this working paper builds a picture of the aggregate FX exposure of the total economy and explores the interlinkages between sectors and how they have evolved in recent years.
Key historical change: Since the start of the pandemic, the overall net FX position of the economy deteriorated, and there has been a considerable shift in FX risk from the private to the public sector. Especially for the central bank, this shift constrains policy space.

Large foreign currency mismatches exist between institutional sectors within Türkiye and with non-residents.
The paper constructs aggregate FX exposure of the total economy by combining several separate data sources.
Since the start of the pandemic:
- The overall net FX position of the economy deteriorated.
- There has been a considerable shift in FX risk from the private sector to the public sector.
- The shift in FX risk notably constrains the central bank's policy space.

Aggregate FX exposure and balance sheets
Interlinkages across institutional sectors and with non-residents
Evolution of FX risk allocation since the start of the pandemic
Implications for central bank policy space and public sector balance sheets
Subject classifications: Financial statements, Foreign exchange, Public financial management (PFM)
Keywords provided: aggregate FX exposure, balance sheets, Currency risk, Financial statements, foreign currency balance sheets, FX position, FX risk, Global, position of the economy, Türkiye