Thread by @Brad_Setser

The two key things in Turkey's May BoP

1) The current account deficit continued ($3.75b in May). Turkey could be on track for a CA deficit of around $40b plus if nothing changes

2) Only $2.75b of the $10b swap from Qatar appeared in reserves, so over $7b was spent

The pressure on Turkey's reserves at this stage is simple -- Turkey is running a current account deficit that the world doesn't want to finance. The trailing 12m sum shows $20b in debt outflows v a close to $10b current account deficit.

A large ($2b) eurobond matured in May, adding to the outflows in the financial account. Outflows from the lira bond market continued at a $1b monthly pace too

No external financing there

85% of long-term bank loans (a year and a day typically -- long-term isn't very long term) rolled in May -- up from 67% in April.

But money is still going out not coming in --

Bank external borrowing isn't helping to fund the current account deficit

So the current account -- plus ongoing financial outflows -- are both being financed out of reserves.

The CBRT in turn replenishes its reserves by borrowing from Qatar, and by borrowing -- via swaps -- from the banking system (which has a large stock of fx deposits)

The CBRT's (short) forward position jumped over $16b to negative $51b in May (the swap with Qatar only explains $10b of the increase, $6b was from other sources).

So my any measure Turkey's forward adjusted net reserves are now negative

Risky game -- financing a current account deficit with borrowed reserves ...