Statement from the Ministry of Treasury and Finance regarding the gold quota

In a statement made by the Ministry of Treasury and Finance, it was conveyed that it was deemed necessary to provide information regarding the quota measures on unwrought gold imports.

The statement recalled that according to TUIK data, unwrought gold imports in 2022 increased by over approximately 200 percent in quantity compared to the previous year, reaching 379.2 tons (20.4 billion dollars), and noted that this amount was approximately 320 tons (19.2 billion dollars) in the first 7 months of 2023.

The statement pointed out that according to the balance of payments statistics published by the Central Bank, 19.4 billion dollars (39 percent) of the 49.1 billion dollar current account deficit in 2022 originated from net gold imports, and provided the following information: "In the first 7 months of last year, the current account deficit was 42.3 billion dollars, and net gold imports accounted for 42 percent of the deficit with 17.7 billion dollars. In order to reduce the negative impact of the increase in gold imports on the current account balance, it was deemed necessary to take measures regarding unwrought gold imports."

The statement noted that various policy measures to reduce unwrought gold imports were evaluated and it was decided to implement a quota as a quick and effective measure, reporting that the quota application was initiated as of August 7, 2023, and the monthly quota amount was set at 12 tons, which is 1.5 times the long-term monthly average of 8 tons for unwrought gold imports.

The statement indicated that, in accordance with foreign exchange legislation, unwrought gold imports are carried out through precious metals brokerage firms authorized by the Ministry, and the quota is applied to import transactions carried out by these companies.

QUOTA DISTRIBUTION CARRIED OUT ON A RULE-BASED BASIS

The statement pointed out that it is only possible for persons who are not precious metals brokerage firms to import unwrought gold within the scope of the inward processing regime (IPR), and conveyed that unwrought gold import transactions carried out within the scope of IPR are kept outside the quota application.

The statement reported that the amounts of unwrought gold imports carried out by precious metals brokerage firms between January 2022 and July 2023, which fall within the scope of the quota application, were taken as the determining criterion for the distribution of the monthly quota amount, and stated that the distribution was carried out objectively and on a rule-based basis. In addition, it was stated that a reserve amount was set aside for firms that did not carry out unwrought gold imports within the scope of the quota in the specified period but wanted to import after the quota application.

QUOTA ALLOCATED FOR JEWELRY EXPORTERS

The statement pointed out that it was conveyed to the Ministry that jewelry exporter firms that are not precious metals brokerage firms experienced problems during the quota application process due to limited access to raw materials and high price margins formed with international markets, and the following was recorded:

"In order to resolve the problems, a portion of the quota has been allocated to be used only by jewelry exporters through banks. Thus, jewelry exporters have been enabled to purchase unwrought gold in accordance with the amount of their exports by applying to the aforementioned banks and certifying the export transactions they carry out outside the IPR. As a result of the issues raised in meetings held with the sector in the following period, the demands and feedback conveyed to our Ministry, the share of precious metals brokerage firms in quota distribution was reduced to reduce price margins formed with international markets and to increase the effectiveness of the application, and the quota allocated for sales to jewelry exporters was increased; furthermore, a portion of the quota was allocated to two public banks to be sold to jewelry businesses authorized by the Ministry of Trade in order to meet the raw material needs of producers and exporters in a wider scope."

The statement also included the distribution of the current monthly 12-ton unwrought gold import quota, using the expression: "Approximately 25 percent is allocated for sales to jewelry exporters, 38 percent for sales to jewelry businesses, 33 percent for precious metals brokerage firms that carried out unwrought gold imports within the scope of the quota application in 2022 and 2023, and 4 percent is allocated and applied as a reserve for precious metals brokerage firms that did not carry out import transactions in the January 2022-July 2023 period but want to import after the application."

UNWROUGHT GOLD IMPORTS DECLINED

According to TUIK data, the statement drew attention to the fact that from August 2023, when the application started, until the end of the year, unwrought gold imports decreased by 3.2 billion dollars to 10.3 billion dollars compared to the same period of the previous year, and by 32.7 percent in quantity to 169.6 tons, and made the following assessment:

"In the first two months of 2024, unwrought gold imports decreased by 6.8 billion dollars to 2.1 billion dollars compared to the same period of the previous year. In this period, unwrought gold imports decreased by 77.9 percent in quantity to 33.1 tons. As of February, the 12-month cumulative current account deficit is at the level of 31.8 billion dollars. While the improvement in the current account balance is expected to continue in the coming period, it is evaluated that the gold balance will continue to contribute positively to this outlook. In this framework, it is observed that the quota application has positively affected the current account balance by limiting unwrought gold imports."

In the statement, it was stated that the quota application would be closely monitored by the Ministry, and the following was recorded:

"In order to minimize the problems experienced by the sector and citizens, transfers are made between quota allocations to meet the needs of precious metals brokerage firms, jewelry exporters, and jewelry businesses, and to reduce the price margins formed in the market. Indeed, after the aforementioned applications, the sector's access to raw materials has increased and it has been observed that price margins have decreased. Our Ministry will continue to closely monitor the application and take necessary measures promptly in the coming period, prioritizing the increase of the sector's raw material needs and the access of sector actors engaged in export and foreign exchange-earning activities to unwrought gold."