The Turkish Lira has lost more than 40 percent of its value in the last two years. Now Turkey is running out of foreign exchange reserves. Investors consider what Ankara & # 39; s options are.
According to Reuters, the 850 billion dollar economy has many potential needs. Turkey, in the event of a crisis coming up and international organizations are literally taking him from the debt to pay their debts according to the forecast of analysts will have to find $ 40-900 million. For many economists, this is an example that fits well with crises in emerging markets.
With the accumulation of foreign debt for years and the gradual increase in the balance of payments, the disappearance of confidence from domestic and foreign investors lost money, inflation rose and the Central Bank raised interest rates to control the situation. Interest rates and shocks in foreign currencies caused deep recession and problems with the banking system. Companies and households were forced to pay their debts, making interest rates untenable and open to further weakening of the currency.
When foreign investments have come to a halt and the cash buffers have disappeared; According to Reuters Turkey & # 39; bigger and longer recession will lead to a current account surplus will lead to & # 39; a few options. Some scenarios considered by foreign investors as likely to be Dış
Save time for capital markets
The financing costs of Ankara have risen, but are not close to exclusion from the international capital markets. A relatively comfortable debt / GDP ratio (which is expected to rise to 35 percent by the end of the year, which is less than that of most emerging markets) can earn some money and replace some of its reserves.
Turkey can seek help from the IMF, but president Tayyip Erdoğan against this idea. Turkey knocked on the door of the IMF for help at different levels about 20 times in the last 50 years. The austerity policy under the latest conditional lending program ended in 2008 has been deployed, still stands as a painful moment for Turkey.
Very few lenders have strong checks and balances as strong as the IMF and can be safe for foreign investors.
Yves Lemay, one of the Moody managers who speak with Reuters, said that it would not be easy or possible for Erdogan to make a "switch" over the IMF.
Some help from & # 39; friends & # 39; in the Gulf
Ankara is closest to Qatar with the help of his friends who need help. Following the currency crisis last summer that Turkey experienced in Qatar, including economic projects and investments to support the Turkish Lira had given a value of $ 15 million support package. The package also included $ 3 billion in currency swaps.
Sources reported that in their statement later to arrive at a place of negotiations with Turkey and financial difficulties Doha has made a statement on aid since it started again. The largest bank of Qatar, Qatar National Bank and shares Commercial Bank in Turkey had.
Other options in the Golf are limited. Relations with Saudi Arabia and the United Arab Emirates, which have invested heavily in Turkish banks, were damaged during the Gulf Crisis after Ankara & # 39; s support for Doha.
Some people individually or as a tool for Turkey, a block of European Union countries had argued that helping. However, as in the case of Greece, the large aid is based on the IMF program and there is not enough political momentum for a large aid.
Only Russia and China remain. Both are part of the BRICS bank or, in the new name, the New Development Bank. However, they have only $ 100 billion in authorized capital and these banks are not designed to support rescue initiatives.
No country wants to perform capital controls, but many countries implement it during crises. Turkey, last March the lira local banks trade with foreign banks had passed near this practice to stop a short time.
Turkey also brought less significant restrictions on the transfer of dollars, but it seems that it needs more financial markets. Compared to the value of the underlying assets of Turkish banks, the share price is as low as during the Greek crisis.
But such moves have consequences. To bring large control applications in Turkey, foreign investors may miss; this would lead to the government reducing spending more and worsening the recession.
Relocation of the National Bank
Turkey can follow the example of Russia. Russia, in 2014 to take control of their financial crisis "inflation targeting" policy was implemented, Turkey can also follow them. This is an app that is used by many central banks.
The decision to follow a path similar to the case of changing the direction of the Central Bank of the Republic of Turkey (some rates were lower on Tuesday) and will have to tighten monetary policy. One thing that is not so easy to do is to get more control from Erdogan, reducing the cost of borrowing to increase economic activity.
Nikolay Markov, senior economist at Pictet Asset Management, says, Bankası The Central Bank should be one of the most important players in saving a country. "According to Markov, the only way to cope with the current crisis is to show interest by raising interest rates in the fight against inflation. Increasing interest rates can bring inflation to the desired level and compensate for the amortization in TL.
The Turkish Lira lost 12 percent against the dollar this year, while inflation fell unexpectedly to 19.5 percent last year.
In the event of an unexpected recovery in inflation, the central bank did not ignore the possibility of using interest rate hikes, but the interruption of Tuesday's swap rates made this message more complicated.