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[video]http://www.businessweek.com/videos/2013-05-14/turkey-goes-from-debtor-to-lender-with-imf[/video]
Turkey pays its last loan installment to the International Monetary Fund after a 52-year relationship, a triumph for Prime Minister Recep Tayyip Erdogan as government debt falls even as private borrowing surges.
The Treasury in Ankara will make a payment of $422.1 million to the IMF today, Deputy Prime Minister Ali Babacan said in televised remarks yesterday. A decrease in government debt to about 40 percent of gross domestic product from 78 percent when Erdogan came to power a decade ago has helped drive lira borrowing costs below higher-rated countries including India, Russia, Brazil and Chile.
The decrease was countered by a surge in corporate borrowing over the period, leaving Turkey “one of the most leveraged economies in the emerging-market universe,” Goldman Sachs Group Inc. said in an e-mailed report yesterday. Net external debt of $413 billion, about 51 percent of GDP, puts Turkey in a league with other countries including the Czech Republic and Poland, and the private sector’s pace of credit accumulation is accelerating, Goldman said in a report from London by economists Ahmet Akarli and Michael Hinds.
“Turkey is a perfect example of the maturing of the emerging-market asset class,” Charles Robertson, global chief economist at Renaissance Capital in London, said by e-mail yesterday. “Once weak, vulnerable and dependent on external assistance, it’s now vibrant and a growth pole for its region.”
While the Turkish government “deserves praise” for fiscal discipline and working its way out of IMF debt, “the private sector has taken its place,” he said.
Last June, Turkey pledged $5 billion to the IMF to help with the European debt crisis, which will make the country a net lender rather than borrower to the fund. The money will be given on condition that Turkey could call it back immediately, a clause Turkey is demanding because of its high current-account deficit, Babacan said.
In transforming from debtor to creditor, Turkey, whose almost $800 billion economy is the largest in the Middle East, joins South America’s biggest economy, Brazil. The Latin American nation was approved for the largest loan in IMF history in 2002, more than $30 billion at the time. Brazil paid the debt off in 2005, two years ahead of schedule. The country also pledged $10 billion to the IMF last year as the fund sought to boost its capacity amid a worsening in Europe’s debt crisis.
Erasing Turkey’s debt to the IMF “is very important from a symbolic point of view,” VTB Capital’s Oreshkin said. “Turkey is able to solve its problems on its own and is able to attract capital.”
http://www.bloomberg.com/news/2013-05-13/erdogan-s-imf-triumph-masks-surge-in-private-debt-turkey-credit.html
Turkey pays its last loan installment to the International Monetary Fund after a 52-year relationship, a triumph for Prime Minister Recep Tayyip Erdogan as government debt falls even as private borrowing surges.
The Treasury in Ankara will make a payment of $422.1 million to the IMF today, Deputy Prime Minister Ali Babacan said in televised remarks yesterday. A decrease in government debt to about 40 percent of gross domestic product from 78 percent when Erdogan came to power a decade ago has helped drive lira borrowing costs below higher-rated countries including India, Russia, Brazil and Chile.
The decrease was countered by a surge in corporate borrowing over the period, leaving Turkey “one of the most leveraged economies in the emerging-market universe,” Goldman Sachs Group Inc. said in an e-mailed report yesterday. Net external debt of $413 billion, about 51 percent of GDP, puts Turkey in a league with other countries including the Czech Republic and Poland, and the private sector’s pace of credit accumulation is accelerating, Goldman said in a report from London by economists Ahmet Akarli and Michael Hinds.
“Turkey is a perfect example of the maturing of the emerging-market asset class,” Charles Robertson, global chief economist at Renaissance Capital in London, said by e-mail yesterday. “Once weak, vulnerable and dependent on external assistance, it’s now vibrant and a growth pole for its region.”
While the Turkish government “deserves praise” for fiscal discipline and working its way out of IMF debt, “the private sector has taken its place,” he said.
Last June, Turkey pledged $5 billion to the IMF to help with the European debt crisis, which will make the country a net lender rather than borrower to the fund. The money will be given on condition that Turkey could call it back immediately, a clause Turkey is demanding because of its high current-account deficit, Babacan said.
In transforming from debtor to creditor, Turkey, whose almost $800 billion economy is the largest in the Middle East, joins South America’s biggest economy, Brazil. The Latin American nation was approved for the largest loan in IMF history in 2002, more than $30 billion at the time. Brazil paid the debt off in 2005, two years ahead of schedule. The country also pledged $10 billion to the IMF last year as the fund sought to boost its capacity amid a worsening in Europe’s debt crisis.
Erasing Turkey’s debt to the IMF “is very important from a symbolic point of view,” VTB Capital’s Oreshkin said. “Turkey is able to solve its problems on its own and is able to attract capital.”
http://www.bloomberg.com/news/2013-05-13/erdogan-s-imf-triumph-masks-surge-in-private-debt-turkey-credit.html
