Turkish finance ministry: credit channels to remain open

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Turkey’s battered lira weakened by more than six percent against the US dollar on Friday, after a US warning that Ankara should expect more economic sanctions unless it hands over detained American evangelical pastor Andrew Brunson.

Turkey’s finance ministry said earlier that credit channels would remain open and that it would take measures to relieve banks, since the Turkish lira crashed to a record low against the US dollar this week.

Finance Minister Berat Albayrak told investors on Thursday that Turkey would emerge stronger from the crisis, which Ankara has cast as an economic war.

In a statement, the ministry also said it would provide flexibility on maturities and pricing to endure cash flow for companies, while taking additional measures to avoid obstacles against borrowing for companies.

A US dollar banknote on top of 50 and 100 Turkish lira banknotes / VCG Photo

The currency crisis has deepened concerns about the broader economy – particularly Turkey’s dependence on energy imports and whether foreign currency debt levels pose a risk to the banking sector.

“There has been no sign that the central bank will be allowed to raise interest rates significantly and return rates to positive territory,” said William Jackson of Capital Economics in a note to clients. “Similarly, there has been no improvement in relations with the US and additional sanctions may be on the horizon.”

The Turkish banking watchdog has taken steps to stabilize the currency, limiting futures transactions for offshore investors and lowering limits on swap transactions. But some economists have called for more decisive moves.

Turkey and its firms face repayments of nearly 3.8 billion US dollars on foreign currency bonds in October, Societe General has calculated. For companies, the cost of servicing foreign debt has risen by a quarter in lira terms in the past two months.

Standard & Poor’s is scheduled to release a review of Turkey’s sovereign credit rating after market close on Friday.

Source(s): Reuters