CHP Report: Political Uncertainty Spurs $12.5 Billion Foreign Capital Outflow and $57 Billion FX Intervention in Türkiye

A new economic report from the Republican People’s Party (CHP) Parliamentary Group highlights the severe impact of political instability—specifically the detention of Istanbul Mayor Ekrem İmamoğlu on March 19—on foreign investor sentiment and portfolio flows in Türkiye.

The report reveals that between March 19 and May 16, foreign investors sold off $12.5 billion in net portfolio assets, undermining the Turkish government’s efforts to attract international capital to curb inflation.

Breakdown of Foreign Capital Exodus

According to the data:

• $6.9 billion was withdrawn from local government debt securities (internal borrowing instruments)

• $4.6 billion was divested from external debt instruments (Eurobonds)

• $1.2 billion came from the stock market (equities)

Despite some buying activity in equities and domestic bonds in the last two weeks of the period, the exodus from external debt instruments continued, reflecting ongoing investor caution.

The total foreign investor portfolio fell by $21.1 billion, from $133.7 billion to $112.6 billion, due to a combination of net sales, declining asset prices, and a weaker Turkish lira.

As of May 16:

• $29.4 billion of foreign capital was in equities

• $12.5 billion in local bonds

• $70.9 billion in external debt instruments

$57 Billion in Central Bank FX Sales to Defend Currency

The report also estimates that the Central Bank of the Republic of Türkiye (CBRT) conducted approximately $57 billion in foreign exchange interventions over the nine-week period to defend the Turkish lira amid growing outflows and financial volatility.

While CBRT has recently resumed foreign currency purchases, rebuilding reserves after this historic drawdown remains a challenge.

Sharp Rise in Debt Enforcement Cases

The report additionally tracks a surge in legal enforcement actions in Türkiye’s judiciary system. From January 1 to May 23, the number of new enforcement files submitted via the UYAP system rose by 7.4% year-over-year, reaching 4.02 million cases—up from 3.75 million in the same period last year.

As of May 23, 2025, the total number of active enforcement cases stood at 23.5 million, an increase of 1.51 million cases in just 12 months—highlighting mounting financial stress among households and businesses.

Conclusion: Foreign Trust Falters Amid Domestic Tensions

The findings suggest that political uncertainty, alongside rising interest burdens, volatile exchange rates, and mounting domestic debt, have undermined foreign investor confidence—despite Türkiye’s ongoing efforts to stabilize the economy.

The CHP report warns that without structural reforms and democratic normalization, Türkiye’s dependence on short-term capital inflows will remain a key vulnerability in its broader economic strategy.