Turkish Lira's Fall Caused Difficulties With External Debt Repayment

Forex News

The Turkish lira has lost about 40% of its value this year, hit by both concern about President Tayyip Erdogan’s influence over monetary policy and a worsening rift with the United States over an American pastor Turkey has detained. The currency's collapse has raised fears companies may face difficulties repaying hard-currency debt and also weighed on shares of European banks exposed to Turkey.

JP Morgan has flagged the risk of a sharp contraction for the Turkish economy, estimating that around $179 billion in Turkish external debt matures in the year to July 2019. The debt is equivalent to almost a quarter of Turkey's annual economic output.

According to the JP Morgan estimates, most of the maturing debt (around $146 billion) is owed by the private sector, especially banks. The government needs to repay or roll over just $4.3 billion and public-sector entities account for the rest.

Today, the Turkish lira has weakened to 6.4 to the dollar, its weakest level since August 15.