土耳其拟对货币市场基金收益征税以遏制约750亿美元里拉套息热钱，政策仍处讨论阶段且未获官方确认

A surge of money into Turkish lira assets is creating a dilemma for policymakers, who are weighing how to curb speculative short-term flows without choking off an important source of support for the currency.

Foreigners have pumped an estimated $75 billion into high-yielding currency derivatives and money market funds, drawn by Turkey’s 37% benchmark interest rate, among the highest in the world. The flows are part of the carry trade, in which investors borrow cheaply overseas and invest where yields are higher.

Combined with similar investments by local savers, the volume of money in short-dated assets is becoming a source of concern. Officials are keen to avoid a repeat of previous instances — most recently during the Iran war — when investors dumped lira assets en masse, forcing authorities to spend billions of dollars and raise interest rates to contain the fallout.

Read more: ‘It’s a Carry World’: EM Trade Posts Longest Run Since 2008

Against that backdrop, the government is weighing a tax on returns from money-market funds, BloombergHT has reported. Such vehicles hold three trillion liras ($62 billion) worth of investments, according to data from financial analysis platform Fon Turkey.

The levy would affect domestic and foreign institutional investors, whose profits — unlike those of individual savers — are not taxed. Turkey’s finance ministry and central bank didn’t immediately respond to requests for comment.

The tax proposal “is likely aimed at limiting swift outflows and avoiding the risk of currency volatility,” QNB Turkey’s chief economist Erkin Isik said, estimating foreign carry traders have the equivalent of roughly $10 billion in lira money-market funds, with the remaining $65 billion in currency forwards.

The tax plan would essentially aim to reduce the appeal of short-term instruments and push money toward stickier, longer-term assets. It comes after authorities introduced more exchange-rate volatility to make the currency forwards trade less of a one-way bet.

Goldman Sachs Group Inc. strategist Kamakshya Trivedi noted officials permitted a “slightly accelerated” pace of lira depreciation in August. The faster depreciation reduced monthly carry returns to less than 1%, he said, roughly half what investors were earning last year.

Turkey needs to tread carefully. The same carry flows have helped replenish foreign exchange reserves and supported the lira, a key pillar of the monetary authorities’ disinflation strategy. Asked recently about hot money inflows, central bank Governor Fatih Karahan said he was reluctant to characterize the trend as risky.

Local Savings

Policymakers also can’t risk reversing domestic investment flows. High interest rates and gradual currency appreciation in inflation-adjusted, or “real,” terms have encouraged Turkish savers to keep their money in lira assets rather than in dollars. Higher taxes and lower interest rates would weaken that incentive.

The central bank has already effectively eased financial conditions by switching bank funding to its main 37% rate from the higher 40% it switched to after the start of the Iran war. That’s rekindled expectations of a possible September interest-rate cut, even though inflation remains well above target.

Nafez Zouk, a debt strategist at Aviva Investors, reckons the proposed tax changes by themselves may not prompt a significant shift by foreigners, as they target specific money-market flows from overseas. But easing policy too soon would be risky.

“If they move to cut in September, without sufficient evidence from inflation prints, then that will seem premature,” Zouk said.

For now, total lira carry remains elevated and among the highest in the world. Lira assets have handed investors year-to-date returns of about 11.2%, trailing only Brazil, Argentina and Colombia, according to data compiled by Bloomberg. Interest rates, even if cut by 200 basis points by year-end as most anticipate, will remain among the highest in the world.

“I’m still happy to run the carry trade,” said Kieran Curtis, head of emerging currency debt at Aberdeen. “How much return we need is dependent on both the returns we have available elsewhere in the world and on the expected volatility.”