Thursday 09, August 2018 by Bloomberg

Turkey reduces government borrowing target amid market collapse

 

Lower spending and increased revenues will bag the government around TRL 35 billion.

  

The Turkish government has announced that it would borrow less than originally planned to narrow the budget gap in the medium term, leading the embattled lira to trim losses.

In a statement, the Treasury and Finance Ministry said that the domestic debt rollover ratio will be 104 per cent at the end of the year, down from an earlier forecast of 110 per cent.

Lower spending and increased revenues will help the budget to run a surplus of around TRL 5 billion when payments on interest are excluded.

The statement is the first from top policy makers on measures to fix the economy’s vulnerabilities since the most recent market rout was triggered by last week’s US sanctions. The penalties on two ministers in President Recep Tayyip Erdogan’s government were imposed over Turkey’s continued detention of an American pastor.

Treasury and Finance Minister Berat Albayrak will elaborate on details of his new economic programme in a briefing on Friday.

The lira gained after the release of the statement having weakened 1.9 per cent to 5.38 per dollar, the currency lost about nine per cent since the US sanctions were announced.

The budget gap will be less than two per cent of economic output this year, in line with previous estimates, and will be capped at 1.5 per cent of GDP in the medium-term ratio of current-account deficit to the economy will stabilise at four per cent during the same period 2019 GDP growth seen at three per cent to four per cent.

Additionally, the inflation will be lowered to single-digit levels as soon as possible Turkey’s banks and non-financial companies face no foreign exchange or liquidity risk.

 

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