The relationship between energy import dependency, current account deficit and foreign debt: The case of Türkiye

This article examines in detail the complex relationship between energy imports, current account deficit and external debt with the example of Turkey. Energy is considered a critical input for sustainable development and economic growth in the global economic system. However, countries dependent on foreign sources for energy resources are forced to import large amounts of energy to meet their energy needs, which puts significant pressure on the current account deficit. A current account deficit occurs when a country's imports exceed its exports, leading to a decrease in foreign exchange reserves and an increase in the country's need for external financing. In this context, energy imports become one of the main components of the current account deficit. In this study, the dynamic relationships between energy imports, current account deficit and external debt are addressed with both theoretical and empirical studies. There is strong evidence in the literature that energy imports contribute to the current account deficit and therefore to the need for external borrowing. On the other hand, some studies also discuss the effects of fluctuations in energy prices and energy imports on macroeconomic balances. It has been observed that the current account deficit widens and this increases the external debt stock, especially during periods when energy imports are high. This situation may have negative effects on the country's debt sustainability in the long term. In this article, the relationship between energy imports, current account deficit and external debt in Turkey is analyzed with quarterly data for the period between 2013-2021. In this analysis, ADF and PP stationarity tests and unit root analysis were first applied to the current account deficit/GDP, external debt/GDP and energy import/Total Import variables for the period of 2013 1st Quarter - 2021 4th Quarter, and then ARDL bounds test and cointegration analysis, Toda-Yamamoto causality analysis, impulse-response analysis and variance decomposition test were applied respectively. As a result of all these tests, it was determined that there was cointegration between energy imports, current account deficit and external debt and that there was a causal relationship between the variables. Keywords: Current Account Deficit, Foreign Debt, Energy Imports, Co-integration Analysis, Causality Analysis