The government is planning to ban small enterprises from borrowing in foreign currency unless they are exporters, according to an announcement from Turkey's deputy Prime Minister in charge of the economy Mehmet Şimşek during the 2018 budget negotiations for the Undersecretary of Treasury, the Banking Regulation and Supervision Agency (BDDK), the Capital Markets' Board and the Central Bank of the Republic of Turkey (CBRT) at the Turkey Grand National Assembly (TGNA).
Deputy Prime Minister Şimşek noted that exporters will be able to borrow in foreign currency at a rate determined in accordance with their average exports over the last three years. He stressed that exporters are allowed to borrow in foreign currency, but said that the government will consider its export capacity.
"For instance," he explained, "if a company's export value over the last three years totals $100 million, then that company will be able to borrow up to $300 million in the U.S. dollars. The borrowing limit can be three or five fold of the three-year export average."
"We will provide financial protection for large companies if they are not exporters by introducing a hedge system. We are entente on a healthy growth model that does not rely on debt," Şimşek stressed.
The deputy minister in charge of the economy recalled the government's previous ban on individuals who borrowed in foreign currency, emphasizing that this ban was effective in easing the pressure on currency.
The minister also elaborated on Turkey's debt stock. By the second quarter of 2017, the ratio of whole debt, including public debts and debt associated with financial institutions and non-financial institutions and the household-to-national-income ratio, was 146 percent.
For developing countries, the ratio of debt stock to national income is 225 percent, according to the latest data from the International Monetary Fund (IMF). China's debt stock is 298 percent of the country's national income, compared to 178 percent for Brazil, 165 percent for the Czech Republic and 163 percent for Poland. "Considering the debt stock average of developing countries, Turkey's debt is not as high as is claimed, but this does not mean that the government will encourage further stock borrowing. We do not accept a growth model based on borrowing," Şimşek said.
