Osman Şenkul
Germany’s largest bank, in terms of both turnover and number of employees, the Frankfurt-based Deutsche Bank, drew attention to the “mysteries” in the “net errors and omissions” category in a note published last March. The note emphasises that, in theory, errors occurring each quarter should “balance each other out,” highlighting the emergence of patterns that Deutsche Bank refers to as “dark matter,” which are clearly not random: “Sometimes, for example, in cases such as unregistered money transfers by people emigrating to New Zealand, the explanation for these patterns is innocent. However, generally speaking, the missing money is seen to stem from capital flight and tax evasion.”
The Financial Times Alphaville reveals Deutsche Bank’s finding that systematic net inflows into the United Kingdom are tracking money leaving Russia and high property prices in London; in other words, this situation can be summarised as: “Buying property abroad is a great way to secretly move your wealth out of the country, because, among other reasons, these transactions are not usually recorded by national statisticians.”
Deutsche Bank also points out that, beyond official records, it has identified large and sustained net capital inflows to Switzerland, Norway and the US, stating, “We want to focus on the significant amount of capital that may have fled much of Northern Europe under the guise of ‘net errors and omissions’.” In Sweden, these unexplained flows are roughly equivalent in size to the total amount of capital leaving the country for investment abroad, according to official records. In Deutsche’s words, “Sweden’s national statisticians are underestimating Sweden’s foreign wealth by approximately 100 percent.”
The Central Bank of the Republic of Turkey (CBRT) refers to these “net errors and omissions” as “net errors and shortfalls.” They are summarised as follows: In a country, when all actual balance of payments entries are aggregated, the resulting balance will almost inevitably show a “net receivable or net payable.” This balance is the result of ‘errors and omissions’ in the compilation of the statements. Some of the errors and omissions may relate to practical approaches to principles. In the balance of payments, the standard practice is to show a line item for net errors and omissions. This line item, referred to by some compilers as the balancing item or statistical inconsistency, is used to offset over- or under-reporting of recorded components.
As defined by economist Mahfi Eğilmez, “The errors and omissions that arise in the compilation of data relating to a country’s balance of payments, which reflects its economic relations with the outside world, are referred to as net errors and omissions in the balance of payments table.” To explain this data more clearly, if the net error and omission item is “negative,” it means that an amount equal to the specified figure has “gone out” but it is not known where and how it went out; if it is “positive,” it means that an amount equal to the specified figure has “come in” but it is not known where and how it came in.
According to the latest data from the Central Bank of the Republic of Turkey (CBRT), Turkey’s “balance of payments” continues to show a very significant ‘plus or minus / net error and omission’ today, as it has for a long time. Accordingly, the balance of payments showed a surplus of $3 billion 163 million in January 2025, a deficit of $2 billion 488 million in February, a deficit of $3 billion 200 million in March, a deficit of $5 billion 981 million in April, a surplus of $1 billion 256 million in May, a surplus of 1 billion 419 million dollars in June, a deficit of 1 billion 696 million dollars in July, a deficit of 998 million dollars in August, and a deficit of 3 billion 824 million dollars in September. For these nine months, the deficit was determined to be 12 billion 349 million dollars.
Although the CBRT explains this situation by stating that ‘the data for the relevant month in Turkey’s balance of payments statistics is published with a delay of approximately six weeks, which can be considered a relatively short delay period according to international practices,’ the CBRT’s annualised data also reveals the same ‘discrepancies.’ In other words, the CBRT itself, after announcing and recording all these monthly data, calculates the ‘pros and cons’ and then announces and records the annualised data. Therefore, when viewed on an annualised basis, the data for September 2024 reveals that the destination of $11.15 billion in the previous annual period and $17.658 billion in the period ending last September remains unknown.
While experiencing all this and monitoring the CBRT records, official statements that ‘current account deficits are under control’ in Turkey continued unabated.
However, at the same time, we also followed assessments from various international organisations, based on different criteria, published in various media outlets. For example, ING Global, which assessed Turkey’s September 2025 balance of payments data, highlighted the decisive role of capital movements. ING Global’s assessment stated, ‘While Turkey’s current account balance for September followed a trajectory in line with forecasts, capital transactions played a significant role in shaping this balance. However, a closer look revealed that the trade deficit increased compared to last year.’ ING Global also noted that weak domestic demand and global trade tensions are expected to be key factors affecting the current account balance in the coming period.
BBVA’s research note also highlighted that household financial assets declined relative to gross domestic product (GDP) and pointed to increased fragility. According to the BBVA Research report, household financial assets in Turkey declined relative to GDP in the second quarter. On the other hand, it is stated that the rise in the net short foreign exchange position has increased the country’s vulnerability to possible shocks. According to the data detailed in the report, household financial assets declined from 39.6 per cent in the first quarter to 38.7 per cent of GDP in the second quarter. While deposits continued to constitute the main component of household financial assets, the net short foreign exchange position reached its highest level since 2018 at $185 billion, increasing fragility risks. Meanwhile, as mentioned above, the most striking element within the current account balance was the decline in the net error and omission item to minus $12.349 billion: “A negative net error and omission item means an outflow of capital from an unknown source. If this item were zero, the current account deficit would approach 27 billion dollars. Therefore, the Central Bank’s data is not reliable; stability or an investment programme cannot be achieved with this picture.”
An article written by economist Mahfi Eğilmez last April also sheds light on a possible outlet for these millions of dollars, whose origin or destination cannot be determined: ‘The data on net errors and omissions in the balance of payments suggests that gold is entering Turkey through illegal channels and that the money is being taken out of the country through illegal channels.’ In his article titled ‘The Rush for Gold,’ Eğilmez wrote, ‘The more uncertainty increases in the world, the more the shift to gold increases, and as a result, gold prices rise because demand for gold increases.’ Noting that the trend of uncertainty in Turkey is also on the rise, Eğilmez commented on the developments, stating, ‘We must emphasise that it is misleading to assume that demand for gold in Turkey is not continuing at its previous pace despite this increase.’
The findings of the International Monetary Fund (IMF) Balance of Payments Statistics Committee meeting entitled ‘Analysis of Net Errors and Omissions’ were also noted as follows: “As global net errors and omissions have historically been high and are increasing rapidly, there is growing concern that this trend reveals the inability of countries’ statistical programmes to adequately measure cross-border transactions and could lead to misguided policy-making. Further research is needed on how to design a comprehensive balance of payments data verification procedure that can address the known and emerging drivers of Net Errors and Omissions. The survey results show that there is no generally accepted level of Net Errors and Omissions or generally accepted indicators for assessing Net Errors and Omissions in the economies surveyed. Half of the respondents stated that they had difficulty distinguishing the accounts contributing to the Net Error and Omission. Across economies, the prevailing view is that improving data sources, enhancing mirror data verification through the use of international databases, and bilateral mirror data exchange are the most effective methods for addressing internal balance of payments asymmetries.
Turkey’s balance of payments deficits, one of the key components of the ‘net error and omission’ data, are widely regarded as the ‘soft underbelly of the economy.’ Generally known as the ‘current account deficit,’ these deficits stem from importing more than producing across all sectors, from industry to services and even agriculture. The Turkish economy continues to run a deficit regardless of whether it exports or imports. In many sectors, in order to export $100 worth of goods, more than $50 worth of imports must be made. Depending on the sector, this requirement can reach 70-80 dollars. The International Monetary Fund (IMF) assesses the situation as follows: “Turkey’s structural policies should be aimed at increasing the competitiveness of domestic goods relative to imports and moving export products higher up the value chain. Over the past decade, Turkey’s strong export growth figures have not met its high import needs. In addition, the increase in export value has begun to lag behind the increase in the volume of exports.”
The pain associated with Turkey’s ‘soft underbelly’ fluctuates with the seasons; during the summer months, when tourism revenues increase, the current account deficit slows down, but as winter approaches, tourism revenues decline, and energy imports increase due to heating needs, the current account deficit accelerates. Thus, the improvement observed in the summer reverses in the winter. In short, the economy is trying to find balance amid imbalances. However, these attempts to find balance always come back to hit the ‘current account deficit’ wall.
While all this was happening, and explanations and assessments were being made, Mehmet Şimşek, Minister of Treasury and Finance, commented on Turkey’s 5-year credit risk premium, stating, ‘Our risk premium has fallen to its lowest level since May 2018. The financial stability we have strengthened through the programme we have implemented has been instrumental in this improvement, while our external financing costs have also decreased significantly.’ Although it cannot be said that this is directly related to net error and omission and similar data, the good news that ‘we will now be able to borrow more cheaply’ may also indicate that, rather than closing the door on billions of dollars of assets whose destination is unclear due to ‘net error and omission’, opportunities to ‘easily add’ new ones may also be provided.
However, at this stage, it is necessary to consider that the main point to focus on is the development that reveals the government’s choice regarding its solution priority.
At the beginning of the week, Şimşek announced that the risk premium on Turkey’s international borrowings had fallen to its lowest level since May 2018. In his assessment of the September inflation figures announced exactly one month ago, he said, “Food prices were the determining factor in the high monthly inflation rate in September. Agricultural frost and drought-induced food inflation was 3 points above the long-term September average and contributed 1.1 points to monthly inflation.” As can be understood from this, nothing could be done because the culprit for the failure to reduce inflation was ‘agricultural frost’. However, despite billions of dollars leaving the country’s borders with no clear destination, the skill to open the door to billions of dollars in new debt was demonstrated in the blink of an eye, and the problem was solved.
Now, we hope that if we could redirect a small portion of the billions of dollars of “net error and omission,” which have strangely disappeared and whose whereabouts are unknown, to the pockets of our farmers affected by the agricultural frost, we would not rank among the top seven countries in food inflation alongside Bolivia, Malawi, Iran, South Sudan, Argentina, and Haiti. More importantly, they would not have to worry about how to obtain the seeds, fuel, and pesticides needed for planting the new season’s crops, or even resort to selling part of their land or taking out loans by mortgaging it to the bank.