Turkish gov't introduces credit shield against exchange rate pressure
by Okan Müderrisoğlu
ISTANBULJan 16, 2017 - 12:00 am GMT+3
by Okan Müderrisoğlu
Jan 16, 2017 12:00 am
The government has taken its decision on supporting the real sector during a summit held with the bankers. Accordingly, state-guaranteed credit will be provided for the firms affected by the volatility in the foreign exchange rate.
The government acted against the operation to break the power of the real sector with the currency attacks. TL 250 billion package, which was prepared for the real sector and previously announced, will be primarily used to improve the situation of firms experiencing exchange rate shock, and continue their production and exports.
A series of critical decisions were taken the other day during a meeting presided by Deputy Prime Minister Nurettin Canikli, who oversees and coordinates the reforms and investments as well as the improvement of the investment environment. The details of the real sector support plan were discussed at the meeting also attended by the administration of the Banks Association of Turkey.
Employment will be prioritized
The criteria for the Credit Guarantee Fund (KGF) to give guarantee between 85-100 percent of the loans used by the banks were determined during the summit. Accordingly, in the first stage, the companies affected by the increase in exchange rate will be provided with additional credits to ensure the continuity of production operations. Companies that cannot produce at the current cost level will be eliminated. Lending to the companies that protect their employment and production will be prioritized. State-guaranteed credit utilization demands of companies that make new investments will be definitely met. While the system is operational, it will not be possible for the banks to restructure the loans against which they currently take administrative or legal proceedings.
There will be no tax adjustmentsMeasures will also be taken for the economy not to enter the recession and experience exchange rate-inflation shock at the same time. Accordingly, in 2017, adjustments will be not made by the public through taxation or similar ways, and the pressure on inflation will be reduced by at least 2 points.
Minimum wages of 500,000 workers to be employed by the private sector will be supported by the state for a period of time. The state will also employ a limited number of 100,000 people in the public benefit jobs. Thus, the economy will be protected by injecting resources into the market thanks to 600,000 new job opportunities.