In 2007, external financing requirement, defined as the sum of current account plus net errors and omissions, was equivalent to USD 38.4 billion. During this period, the net capital inflow (excluding reserve shifts and IMF loans) amounted to USD 53.9 billion. The financing structure was heavily shaped by direct investments and long-term credit inflows.

As a result, gold-included CBT reserves increased to USD 76.4 billion at end-2007 from USD 63.3 billion at end-2006, FX assets of commercial banks rose from USD 27.5 billion to USD 31.8 billion during the same period.

The financial account recorded a net capital inflow of USD 38,411 million in 2007 corresponding to 18.8 per cent increase over the previous year. The main developments under financial account during this period are summarised as follows:.

Direct investments to Turkey hit a record-high increase in the last two years, on account of privatisations and mergers. Net foreign direct investment inflows amounted to USD 22.0 billion in 2007.

In net foreign direct investment inflows the equity capital investments represented USD 18.5 billion. In 2007, investments equaled to USD 19.2 billion, but on the other hand, showed an outflow of USD 0.7 billion from the existing investments.

The services sector had the largest share in direct investments through the banking sector. The services sector comprised 63.8 per cent of the total direct investments in 2007. Meanwhile, the investments to the manufacturing industry tend to increase due to the direct investments made in chemicals, food-tobacco and basic metals, and other non-metallic minerals. In fact, manufacturing industry investments, which comprised 9.1 per cent of direct investments including real estate and other capital in 2006, increased to 19 per cent in 2007.

Among the highest direct investments made in 2007 were USD 3.1 billion worth of investment from Citibank to Akbank, USD 2.7 billion worth of investment from ING FM Derivatives to Oyakbank and USD 2.3 billion worth of investment from National Bank of Greece to Finansbank.

A great deal of investments originated from EU member countries, supported by a significant volume of capital inflow from the United States and Asian Countries.

Non-residents’ real estate purchases in Turkey constitutes another significant item within direct investment inflows. Real estate purchases yielded a USD 3 billion-worth direct capital inflow in 2007. It is observed that non-residents’ real estate purchases in Turkey increased by 1 per cent in 2007 over 2006.

Residents' net direct investment abroad recorded a net outflow of USD 2,101 million in 2007, increasing from USD 924 million in 2006.

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Portfolio investment, which had resulted in a net inflow of USD 7,373 million in 2006, also showed a net inflow of USD 717 million during the twelve-month period in 2007.

As for the developments in portfolio investments' assets side, it is observed that residents' security transactions abroad recorded net purchases of USD 4,029 million in 2006, and USD 2,063 million in 2007.

As for the developments in portfolio investments' liabilities side, the net borrowing figure showed an inflow of USD 923 million in 2007, compared with USD 3,334 million in 2006.

In January 2007, Turkish Treasury reopened the bonds due 26 September 2016 and 17 March 2036. The bonds due 2016 and 2036 have been increased by a further USD 500 million.

In February, the first Euro denominated Global bond of the year, as part of the 2007 external borrowing programme, was issued. The bond had 12 years to maturity with a nominal amount of EUR 1.25 billion. In February, Turkish Treasury also reopened the bond due 5 June 2020. The bond has been increased by a further USD 750 million.

Turkish Treasury released one more issue in October amounting USD 1.25 billion.

Approximately USD 4.6 billion of funds have been raised via the Bond issuances in 2007.

EUROBOND ISSUANCES IN 2006, 2007, 2008

Turkey enjoyed a net capital inflow of around USD 25.9 billion in 2007 registered under the “other investments” item. Over the year, private firms and banks located in Turkey borrowed long-term external loans worth USD 34.4 billion. Besides, net trade credits used through 2006 amounted to USD 4.2 billion on timed imports.

The upsurge in the share of long-term credits in total financing that began in 2005 continued in 2007. Throughout the year, banks borrowed long-term loans amounting to USD 7.3 billion net and repaid an amount of USD 1.9 billion of short-term loans. Private companies, on the other hand, borrowed a net amount of USD 27.2 billion in long-term and USD 0.2 billion in short-term.