Page 69 - TURKRptMay19

When lenders’ and corporates’ obligations to their branches and affiliates abroad are excluded, Turkey was obliged to repay $156bn in foreign debts across the next 12 months as of end-February, up from $155.4bn as of end-January . The private sector’s outstanding foreign loans showed that the sector was obliged to repay $62bn in external loans across the 12 months following end-February. This figure stood at $70.5bn at end-July 2018.
The Turkish private sector is on the hook to repay (as there is no news of defaults) $7bn in foreign loans this month and it is due to pay another $8.5bn in May. Recall that in May last year, when the lira was traded against the refrain of “Sell in May, Go on holiday!”, the currency started to break through its historical record lows against the USD .
Lost its window. Presently, the Turkish government appears to have lost its window for external borrowing given how it shot itself in the foot when it stunned financiers by starving the London swap market of lira last month in a bid to frustrate short sellers and protect the currency in election week. Last September, finance minister Berat Albayrak enjoyed rather fruitful meetings with hot money investors in London, but—partly given the swap market shenanigans—his latest encounter with such investors last week, when he arrived in Washington for the IMF and World Bank spring meetings, by many accounts proved one of the most sobering experiences a finance minister has ever endured. Sure, he returned back home with a photo of himself talking Turkey in the Oval Office, but the bad and scathing language used by investors in describing his on-stage presentation of a so-called economic reform package was enough to make even some of the tougher-talking traders blush.
Financiers funding the way ahead for the Erdogan administration were sold on the idea of officials taking a serious and focused approach to fixing Turkey’s economic ills once the country had moved beyond the local polls and into a four-year period in which there would be no scheduled elections to upset calculations (such remedial work is long overdue, the country’s economic difficulties have essentially been growing since 2011, though they were much disguised until half-way through last year). But the elections served up a humiliation for Erdogan and his AKP party, with the opposition scoring two heavily symbolic victories, those of Ankara and Istanbul.
The “will he, won’t he” question as to whether strongman Erdogan will attempt an Istanbul poll rerun to reassert his authority has now been bugging the markets for nearly three weeks , and, given Erdogan’s manoeuvres since election night, all those Pollyannas who insisted on seeing the political situation in Turkey as normal may finally take a long hard look at themselves. What’s more, it no longer seems viable that the governing coalition can avoid holding snap elections all the way up to 2023, given the perilous situation with the economy and the new currents running through domestic politics.
Ominous rumbles. Since April, indeed, there have been ominous rumbles from the IIF that Turkey could already be in the midst of another ‘sudden stop’ in its balance of payments. The first occurred last August after the lira tanked. Another occurrence could help rein back the current account deficit—which has lately started pulling away again—but it would be bad news for debt roll-overs.
Central bank data suggest that the market value of foreign investors’ overall Turkish equity stock on the Borsa Istanbul fell to $30.5bn as of April 5 from $49.4bn as of end-March 2018, while the picture is even more dramatic in government bonds—the market value of foreigners’ domestic government bonds stock fell to $14.5bn from $29.3bn and repo stock
69 TURKEY Country Report May 2019 www.intellinews.com