Turkey Outpaces G20 In Liquidity Support Amid COVID-19

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

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

Global economic activities and trade grounded to a halt and millions of people lost their jobs since the declaration of the pandemic.

While the virus hit the economy of developed countries through the healthcare systems, it also deepened the existing problems in low-income countries.

In a period 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 suffered a breakdown.

While Turkey had to implement closing measures to contain the epidemic, it used support methods such as restructuring loans and debts, liquidity support to the market, low-interest loan facilities, and policy interest changes as part of support and incentives to reduce the economic impact of the pandemic.

According to IMF’s April report, Turkey, which is at the bottom of the list of countries that provide the largest support to its citizens compared to developed economies in time of the pandemic, takes the lead among G20 emerging markets in terms of liquidity supports.

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, a senior emerging-market strategist at the London-based BlueBay Asset Management, said: “This underlines that Turkey had plenty of fiscal space given the low debt/GDP ratio to provide COVID-19 release.

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

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

Over Turkey’s maintaining its fiscal discipline while bolstering the economy amid the pandemic and developed economies’ high indebtedness ratios compared to their public debt, Rogers said: “I have serious doubts about what Japan, the US, the UK and others have done since young Americans are inheriting gigantic debt burdens in the future. My children will face huge problems for the rest of their lives.”

Turkey’s liquidity supports covered semi-fiscal transactions such as equity capital reinforcements, credits, asset purchase or debt undertaking, guarantees and loan payment deferrals.

Within this scope, Turkey Wealth Fund was assigned with capital support to companies whose cash flows are adversely affected by COVID-19.

Refinancing

Public lenders — Ziraat Bankasi, Halkbank, and Vakifbank — postponed principal and interest payments of those firms for at least three months and refinanced them.

The country extended repayment periods for specified credit card loans, launched low-interest credit packages for low-income households, delayed repayments of the tradespeople in April, May, and June without penalty, provided new low-interest loans and new credit cards with longer repayment periods for tradespeople and offered new credit packages that protect their employment.

On June 1, public deposit banks launched new retail loan campaigns for house purchases and consumer spending. Farmers’ loans that will become due in May and June have been postponed by six months.

Under the Treasury-backed credit guarantee system, Credit Guarantee Fund doubled in size from 25 billion Turkish liras ($3.67 million) to 50 billion liras ($7.34 million) as part of the government’s coronavirus Economic Stability Shield package.

Turkey’s external gross debt stock amounted to $450 billion as of end-2020, 62.8% of its GDP while net foreign debt totaled $268.9 billion as of Dec. 31, 2020, some 37.5% of the GDP.

Meanwhile, Treasury-guaranteed foreign debt stock reached $14.8 billion in the same period.

The public net debt stock amounted to 967.6 billion Turkish liras ($130.2 billion) in the same period.

The EU-defined general government debt stock of the country was nearly 2 trillion Turkish liras ($268 billion), or 39.5% of the GDP as of end-2020.