Turkey’s central bank has revised some of its data compilation methods and definitions, as a result of which the country’s short-term external debt — foreign liabilities with a maturity of up to 12 months — dropped to $164 billion from $189 billion over a month.

The bank justified the revision on the grounds of inconsistencies identified in trade credits data, saying that the revised statistics, released Aug. 19, were the outcome of efforts to improve data quality and compliance with international standards. The new methodology, which relies on direct reporting at company level rather than macro data of foreign trade and bank reporting, “affected export receivables upwards and import payables downwards,” according to a research note by central bank experts.

The bank introduced also a distinction according to maturity between the short- and long-term deposits of nonresidents in Turkey, which were all assumed to be short-term thus far. As a result, long-term deposits — those with maturity of above one year — were excluded from the short-term external debt table. In another revision, foreign funds obtained through repossession are now recorded as loan obligations for banks.

The revisions bettered Turkey’s net international investment position, which shows the gap between the country’s total assets and total liabilities, and narrowed the real sector’s foreign-exchange deficit.

Some critics see the revisions as a “cosmetic makeover” to improve Turkey’s debt outlook amid the precarious state of the central bank’s international reserves. Yet, they argue, the revisions are unlikely to better the short-term debt to reserves ratio as much as Ankara might be hoping, and could instead fuel questions over the credibility of central bank data, just as similar data revisions by the Turkish Statistical Institute did in the past, and shake further the already waning investor confidence in Ankara’s economic management. The appointment of Sahap Kavcioglu, a ruling party loyalist, as central bank governor in March marked the third time since mid-2019 that President Recep Tayyip Erdogan had abruptly replaced the bank’s chief, stoking concerns over the independence of monetary policy.



Written by Mustafa Sönmez