Turkey’s one-year foreign debt repayment obligations down 3% m/m to $175bn at end-Aug

Turkey’s one-year foreign debt repayment obligations down 3% m/m to $175bn at end-Aug
By bne IntelliNews October 17, 2018

Turkey’s short-term external debt stock edged down by 6% m/m to $114bn as of end-August from $121bn at end-Julythe country's central bank said on October 17.

External debt maturing within one year or less regardless of the original maturity was also down by 3% m/m to stand at $175bn at end-August compared to $181.3bn at end-July.

According to the figures, the public sector is on the hook for a total of $31.7bn in foreign debt (down from $33.3bn at end-July), including $26.9bn owed by public banks (down from $29bn a month ago), in the coming one-year period. The private sector, meanwhile, has obligations to pay $142bn (down from $147.5bn at end-July), including $71.5bn faced by private banks (down from $74.1bn) and $64.3bn by non-financial companies (down from $66.3bn).

The short-term external debt stock grew by 16% y/y to $118bn at the end of 2017 from $101.5bn at the end of 2016.

Turkey was obliged to repay a total of $45bn in foreign debts across August-December, $37bn of which was to be paid by the private sector, the treasury said on September 28.

The dizzying descent of the Turkish lira (TRY) has hurt Turkish companies that have borrowed on the international markets as it has made it more costly in lira terms to repay debt.

As regards government guarantees to repay private-sector debt, they should be gradually scaled back and limited to “clear market failures”, the International Monetary Fund (IMF) said earlier this month in the latest edition of its World Economic Outlook.

Turkey is heavily dependent on external borrowing due to its chronic current account deficit. Debt-financed consumption has been the prime feature of the country’s remarkable economic growth achieved during much of the past decade, while the private sector’s share in total external borrowing has been on the rise in recent years.  

Turkey’s current account deficit widened by 42% y/y to $47.1bn in 2017, driven by rising gold imports and energy prices. However, there are forecasts that an upcoming recession could erase a substantial part of that.