Turkey’s short-term external debt stock stood at $102bn at the end of March, marking a 4% q/q increase, the country's central bank said on May 16.

Turkey is heavily dependent on external borrowing due to its chronic current account deficit. Debt-financed consumption was the prime feature of the country’s remarkable economic growth achieved during the last decade, while the private sector’s share in total external borrowing has been on the rise in recent years. 

As economic growth is now heading for a slowdown and exports remain weak, Turkey’s corporate sector, especially when it comes to tourism firms, may find it challenging to meet their liabilities. Political concerns are also putting additional pressure on the lira, creating a tougher environment for the country’s private firms.

The short-term debt of the public sector rose by 1% q/q to $16.5bn at end-March, while the indebtedness of the private sector increased by 5% y/y to $85.5bn, with private banks’ short-term foreign borrowings having risen 6% y/y to $43.7bn.

The short-term external debt stock on a remaining maturity basis, with the calculation based on the external debt maturing within one year or less regardless of the original maturity, was $163.7bn as of end-March. Some 51% of the total end-Q1 debt was comprised of US dollars and 30% was comprised of euro debt, according to central bank data.

The short-term debt stock declined by 4% y/y to $98bn at the end of 2016 compared to the $102bn recorded at end-2015.

“The outlook is clouded by heightened political uncertainty, security concerns, and the rising burden of foreign-exchange-denominated debt caused by the lira depreciation,” the IMF warned Turkey last month.

Moody’s Investors Service on March 17 lowered Turkey’s rating outlook to negative from stable, citing “the continuing erosion of the country’s institutional strength, its weaker growth outlook, heightened pressure on public and external accounts and the increased risk of a credit shock”.

Moody’s also noted that “weaker growth is negatively impacting Turkey's key credit anchor - its healthy public finances and low government debt”.

Turkey's Short-term External Debt Stock
(mn USD)	Q2-15	Q3	Q4	Q1-16	Q2	Q3	Q4	Q1-17
CENTRAL BANK	270	208	176	173	157	131	110	108
DEPOSITS WITH CBRT	270	208	176	173	157	131	110	108
BANKS	90,125	82,011	64,520	67,982	65,969	62,956	57,354	59,952
CREDITS	37,401	28,751	22,701	19,628	18,963	16,674	14,707	15,335
FX DEPOSITS	13,729	14,857	14,821	15,408	15,801	15,076	13,231	13,239
BANKS ACCOUNTS	25,329	24,102	17,387	18,842	17,236	16,738	17,251	18,256
TRY DEPOSITS	13,666	14,301	9,611	14,104	13,969	14,468	12,165	13,122
OTHER SECTORS	35,145	36,022	37,184	37,831	40,687	39,421	40,518	42,066
TRADE CREDITS	30,970	31,672	33,145	33,031	35,348	34,452	36,440	37,760
DUE TO IMPORTS	27,262	27,947	29,459	29,318	31,766	30,824	32,773	34,124
PRE-EXPORT FINANCING	3,708	3,725	3,686	3,713	3,582	3,628	3,667	3,636
OTHER CREDITS	4,175	4,350	4,039	4,800	5,339	4,969	4,078	4,306
PRIVATE	4,175	4,350	4,039	4,800	5,339	4,756	3,837	4,059
TOTAL	125,540	118,241	101,880	105,986	106,813	102,508	97,982	102,126
source: tcmb