Aug 09 2018

Turkey sees no corporate liquidity risk as lira tumbles

Turkey sought to play down the negative impact on indebted Turkish companies of a recent slump in the lira, as the currency tumbled to fresh lows on Thursday.

Turkish corporations and banks have no foreign exchange liquidity risk, the Treasury and Finance Ministry said in an e-mailed statement.

The lira slumped to a new low of 5.448 per dollar as talks between Turkey and the United States over the incarceration of U.S. pastor Andrew Brunson and other Americans broke down.

The ministry’s assessment contradicts warnings by ratings agencies and the International Monetary Fund concerning the foreign exchange-denominated debts of Turkish corporates. Turkish firms are exposed to more than $220 billion of unhedged foreign currency loans, according to central bank data, and several large corporations, including energy companies, have already applied to banks to restructure more than $20 billion.

Newly-appointed Turkish Treasury and Finance Minister Berat Albayrak, the son-in-law of President Recep Tayyip Erdoğan , will make a statement on Friday about the government’s economic plans, the ministry said, a step that investors have called for to help ease market concerns about the lira and economic stability.

One of Turkey’s concerns during the talks in Washington on Wednesday was a U.S. Treasury investigation against Turkey’s state-run Halkbank for allegedly breaking sanctions on Iran, Bloomberg reported, citing a U.S. official. The probe could lead to hefty financial penalties. Some analysts say fines may total more than $10 billion and have a crippling effect on the economy.

U.S. officials told the Turks that they wouldn’t discuss relief for Halkbank, or for one of its bankers currently in a U.S. jail, until Brunson was freed, the official said, according to the news wire.

The ministry also outlined economic and fiscal goals that Turkey planned to follow this year and next.

Turkey will keep the budget deficit at below 2 percent of GDP this year and at 1.5 percent in the medium term, the ministry said in the statement. The Treasury’s end-2018 domestic debt rollover ratio will be 104 percent and will be cut to below 100 percent, it said.

The ministry also said Turkey sees economic growth of 3-4 percent in 2019, less than a previous goal of at least 5 percent.