Turkey’s gross external debt stock rose by 3% q/q and 12% y/y to reach $467bn by the end of March, the Treasury said on June 29.

Heavy dependence on external borrowing is a worrying reality in Turkey due to the country's chronic current account deficit. Debt-financed consumption has been the prime feature of the surging economic growth achieved by Turkey during much of the past decade, while the private sector’s share in total external borrowing has been on the rise in recent years. 

The gross debt stock rose by 11% y/y to $454bn at the end of 2017.

The private sector's share in the country’s total gross external debt stood at 70% or $325bn at the end of March 2018.

Turkey’s gross external debt stock corresponded to 52.9% of GDP as of the end of March 2018, lower than the 53.4% recorded at the end of 2017, which was the highest level posted since Q1 2003. The ratio stood at 47.4% at the end of 2016, up from 46.4% at the end of 2015.

Turkey's net external debt stock also increased by 4% q/q and 13% y/y to $303bn as of the end of March 2018. 

The net external debt stock edged up by 15% y/y to $291bn at the end of 2017 from $254bn at the end of 2016.

Also, the net external debt stock to GDP ratio rose to 34.3% at the end of Q1, the highest level seen since Q2 2003.

The net external debt stock stood at 29.4% of GDP at the end of 2016 and 34.2% at the end of 2017.

Turkey’s foreign-currency corporate debt amid the country’s debt-fuelled and consumption-driven growth boom is equal to about 40% of economic output and its cost is climbing every day, putting the nation’s companies in a tight spot, Bloomberg reported on March 29.

Turkey’s corporate foreign-currency debt pile has more than doubled since 2009, with about 80% held by domestic banks. In the same period, the dollar and euro rates have more than doubled against the TRY.

With an eye on addressing the risk generated by Turkey’s corporate debt and defending the lira, the government decided to restrict hard-currency borrowing for some of the smallest companies from May. Under the plan, larger borrowers were to be told to hedge against their exposure.

The corporate sector’s foreign-exchange liabilities stood at a record $328bn as of the end of 2017. When the sector’s foreign-exchange assets are subtracted, the shortfall still stands close to a record $214bn.