State-guaranteed foreign debt rises ten-fold

Emre Deveci

Turkey’s gross foreign debt stock rose to 466.7 billion dollars as of 31 March and its net foreign debt stock to 303.2 billion dollars. The gross foreign debt stock increased by 12.4 billion dollars against 31 December 2017 and by 49 billion dollars against 31 March 2017. The lion’s share of the increase was accounted for by public-private cooperation projects. According to data released by the Treasury Undersecretariat, the gross foreign debt stock has been put at 52.9% of domestic income and the net debt stock at 34.3% of domestic income. It has been announced that 325.1 billion dollars of foreign debt is attributable to the private sector (69%), 140.8 billion to the public sector and 653 million dollars to the Central Bank.

Influence of public-private cooperation projects

In the period in question, the Treasury-guaranteed foreign debt stock was 14.2 billion dollars. The corresponding figure in 2009 was 6.6 billion dollars. The increase over eight years has been 114%. Public banks’ treasury-guaranteed foreign debt stock reached the level of 8.8 billion dollars as of 31 March 2018. This item has registered a 905% increase over the past eight years. Public-private cooperation projects devoted to motorways, bridges and city hospitals have made a significant contribution towards this large increase. On the other hand, the net public debt stock stood at 271.6 billion lira in this period. The stock was determined to be 8.4% of domestic income. The EU-defined general government debt stock is 922.3 billion lira and this figure was put at 28.4% of domestic income.

Indebtedness predominantly private

The private sector’s foreign debt stock, which stood at 43 billion dollars at the end of 2002, reached the level of 325.1 billion dollars as of 31 March 2018. The increase over sixteen years has been 655%. Private foreign indebtedness rose by 36 billion dollars over the past year. At the time of global monetary expansion, the private sector’s foreign debt increased since foreign currency was cheap and in abundant supply, but 2018 saw the start of a new era. With major central banks, most notably the US Federal Reserve, starting to raise interest rates in tandem with monetary contraction, the purchase of bonds is also being brought to an end. With it thus getting harder and more expensive to procure foreign loans, refinancing is becoming increasingly difficult. Public-private cooperation projects whose number has reached 158 amounting to 61.6 billion dollars in investments have made a significant contribution towards the rapid increase in private indebtedness. With companies borrowing from state banks on many projects, treasury guarantees have been secured for the public banks’ foreign debt.

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