As everything in Turkey is going normal, one of the matters the groups most disturbed by this dwell on is the rollover risk of Turkey's foreign debt. While the countries around us are having difficulty paying off their debts, as a matter of fact, while they are unable to find new loans or become indebted at a very expensive rate, the lack of such a problem in our country has extremely disturbed certain groups both in Turkey and abroad. One of the most important reasons behind this is that it is a strong and stable government, and the other is that economic data is technically very positive.
Based on this, the most important factors in a country getting easily into debt is that country's financial state, credibility and the banking industry.
The banking industry in our country is in a much better place today than European banks in terms of profitability, equity structure and follow up rates. Despite this being the case, rating assessment institutes negatively downgrading Turkey and its banking industry’s credit rating - at least 10 times in the last two years - is quite meaningless and unscientific.
The main reason these institutes used when downgrading Turkey's credit note was that it would experience trouble in terms of the current deficit problem and the renewal and repayment of short-term debts. They had especially debated that the more than $30-billion reserve would cause problems in terms of paying off these debts.
Looking at Turkey's total debt structure of $466,657 billion: $525,142 billion of this is private industry debt, and the remaining $140,865 billion is public debt. The amount pertaining to banks is $186,557 billion.
When our private industry debt is sorted based on term, debt that has a payment deadline of one year or less, regardless of its agreement term, is $180 billion. As much as $104 billion of this belongs to banks, while half of it is credit loans. Because the other half consists of funds held at our banks by foreign customers and the funds banks obtain from main or subsidiary banks.
Although action is taken based on the assumption that the said bank debt will be renewed in total or raised, the foreign currency liquidity of about $24 billion at today's value - held by the banking system at the Central Bank of the Republic of Turkey (CBRT) for obligatory Turkish lira rollovers - and Turkey's foreign exchange liquidity that is about $90 billion, the result of the short-term foreign exchange swaps made with foreign banks, meets banks' all foreign exchange payments that will be due for payment in the next year.
In addition to this, the Central Bank also has limits of about $50 billion in foreign exchange depo markets that it will allow banks to use. Let alone, in the event that banks feel the need, the CBRT stated that it can also expand these limits. Hence, there appears to be no problem in terms of managing the said debt in this process in terms of banks.
One other situation regarding bank debts having a term of one year or less is that while $29.9 billion of the debt belongs to public banks, the remaining $74.2 billion belongs to private banks. As is known, 70 percent of private banks are foreign-owned. Hence, as its own main banks are not under the risk of lapsing into default, there is no risk here either.
Meanwhile, following the payment of the bank syndications due in the final quarter and later, it is already certain that at least 70 percent of these debts will be renewed. What's bad for us is that the price will increase a little more. Yet, this is temporary.
Looking at the real industry, debts with payment terms of a year or less appear to be $73 billion. This should not be considered as a debt in total. Close to 25 percent of this debt consists of cash loans and the remaining $48 billion is import-based commercial undertakings, in other words, there are goods in exchange for it. We will fail to make a correct analysis if we consider all of these as loans.
The loan rollover rate of the real industry in the last year is 135 percent. The industry currently has equities. So, there appears to be no problem here either.
One other matter is that while Turkey's debt structure is being discussed, it is being analyzed based on the debt structure prior to 2001. As Turkey's debt structure prior to 2001 was heavily public debt-based, its debt structure now consists mainly of private industry debts. Therefore, saying that the reserve for these loans is insufficient, based on net reserve alone, is an inadequate analysis. Had we been discussing just public debt, only then would the analysis have been correct. Considering the fact that the private industry currently maintains $40 billion with the CBRT, we need to take the gross reserve as basis when making an evaluation.
Everyone must know very well that ever since the Ottomans, Turkey failing to pay its debt has never happened in the history of the Turkish state. The Republic of Turkey has even paid its debts left behind from the Ottoman era on time.
