ISTANBUL: Turkey is growing increasingly worried about the effects of the lira’s decline and problem loans. Days after saying it would ease rules on non-performing loans, Deputy Prime Minister Mehmet Simsek signalled the government would also be willing to help companies manage a gap in foreign-currency liabilities and assets. While the government won’t be indifferent to troubles facing businesses, it may have to limit the amount of foreign-currency debt companies can accumulate. “We may have to limit excessive risk taking in foreign currency by the companies,” he said at a conference in Istanbul on Tuesday. “The measures may include making it harder for companies without foreign-currency income to borrow in foreign currency. We are also working on better management of short positions.”
Foreign-currency short positions, or the difference between foreign-exchange assets and liabilities of Turkey’s non-finance companies, amounted to US$213bil at the end of September, according to central bank data, representing a quarter of the country’s gross domestic product. A 16% depreciation in the lira against the dollar this year means that debt is becoming more expensive to repay for companies with local-currency earnings.
Turkey’s government has announced a series of measures aimed at easing stresses in the banking industry hit by the troubled loans at their highest level in seven years. The banking regulator last week eased rules on non-performing loans a day after the government agreed to help commercial banks boost lending in an effort to revive growth. Simsek predicts the economy will expand more than 2% this year, compared with 6.1% in 2015 based on revised GDP data. “In the past, the government took measures regarding the borrowing by consumers and it worked well,” Simsek said, adding that the government hasn’t yet decided on what steps it may take for businesses. “Derivative instruments must be used by private-sector companies to hedge against foreign-currency short positions.”
