Turkey overtakes G20 in liquidity support amid COVID-19


ANKARA

Among the emerging G20 economies, Turkey provided the most liquidity support relative to its GDP in response to the coronavirus pandemic, according to the IMF’s Fiscal Monitor.

The spread of the virus, declared a pandemic by the World Health Organization on March 11, 2020, has caused the worst health crisis of all time while massively shaking the world economy.

Global economic activity and trade have come to a halt and millions of people have lost their jobs since the pandemic was declared.

While the virus has hit the economies of developed countries through health systems, it has also exacerbated existing problems in low-income countries.

At a time when international solidarity was needed, countries closed their borders and implemented lockdown measures to stem the spread of the virus, and globalization and international supply chains collapsed.

While Turkey had to implement closure measures to contain the outbreak, it used support methods such as loan and debt restructuring, liquidity support to the market, low rate lending facilities. interest and policy changes of interest as part of the support and incentives to reduce the economic impact. of the pandemic.

According to the IMF’s April report, Turkey, which sits at the bottom of the list of countries providing the most support to its citizens compared to developed economies at the time of the pandemic, takes the lead in emerging markets in the G20 in terms of liquidity support.

Turkey left behind countries, including China, Brazil, India and South Africa, with a liquidity support to GDP ratio of 9.4%, according to the report.

It was followed by Brazil with 6.2%. The figure was 1.5% in Russia and 1.3% in China.

The ratio of loans granted under the Treasury-backed credit guarantee system to the country’s GDP reached 6.4%.

Turkey has done a lot

Timothy Ash, senior emerging markets strategist at London-based BlueBay Asset Management, said: “This highlights that Turkey had a lot of fiscal space given the low debt-to-GDP ratio to deliver the COVID-19 version.

Jim Rogers, the investor who co-founded the Quantum Fund with George Soros and chairman of Rogers Holdings and Beeland Interests in Singapore, pointed out that Turkey has done a lot to save its citizens from this disaster, as has the United States, the Japan, UK and most of the others.

“Turkey has done more than most countries,” noted Rogers.

On maintaining Turkey’s fiscal discipline while strengthening the economy amid the pandemic and the high debt ratios of developed economies to their public debt, Rogers said: “I have serious doubts on what Japan, the United States, the United Kingdom and others have been doing since young Americans inherit huge debt burdens in the future. My children will face huge problems for the rest of their life. “

Turkey’s liquidity supports semi-fiscal hedged transactions such as capital building, credit, asset purchase or debt commitment, guarantees, and loan payment deferrals.

As part of this, the Turkey Wealth Fund has been allocated capital support to companies whose cash flows are affected by COVID-19.

Refinancing

The public lenders – Ziraat Bankasi, Halkbank and Vakifbank – have postponed the principal and interest payments of these companies for at least three months and have refinanced them.

The country extended the repayment periods of some credit card loans, launched low-interest credit packages for low-income households, delayed merchant repayments in April, May and June without penalty, granted new low interest loans and new credit cards with more time. repayment periods for tradespeople; and offered new credit packages that protect their jobs.

On June 1, public deposit banks launched new campaigns for personal loans for home purchase and consumer spending. Loans to farmers which will mature in May and June have been postponed for six months.

Under the Treasury-backed credit guarantee scheme, the Credit Guarantee Fund doubled in size from 25 billion Turkish liras ($ 3.67 million) to 50 billion lira (7.34 million dollars). dollars) as part of the government’s coronavirus economic stability shield program.

Turkey’s gross external debt stock stood at $ 450 billion at the end of 2020, 62.8% of its GDP, while the net external debt stood at $ 268.9 billion as of December 31, 2020 or 37.5% of GDP.

At the same time, the outstanding external debt guaranteed by the Treasury reached $ 14.8 billion during the same period.

The stock of net public debt stood at 967.6 billion Turkish liras ($ 130.2 billion) during the same period.

The country’s general public debt stock, as defined by the EU, was almost 2 trillion Turkish liras ($ 268 billion), or 39.5% of GDP at the end of 2020.

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