Turkiye’s short-term external debt saw limited change in July 2024, as banking sector debt rose by 12.7% while other sectors saw a slight decrease.
Turkiye’s short-term external debt stock showed limited change as of July 2024, standing at $176.1 billion, according to data released by the Central Bank of the Republic of Turkiye (CBRT). This figure represents a near standstill compared to the end of 2023, reflecting both the resilience of the country’s financial system and the ongoing pressures from global economic factors.
Sector Breakdown of External Debt
In July 2024, the distribution of short-term external debt varied across sectors, with notable movements in the banking sector and other industries. Here’s a breakdown of the changes:
- Banking Sector: Short-term external debt in the banking sector grew by 12.7%, reaching $77.1 billion. This increase highlights the growing reliance on external credit and funding within the Turkish banking system.
- Other Sectors: Conversely, other sectors experienced a 1.7% decline in their short-term external debt, bringing the total to $60.3 billion. This drop reflects a shift in external borrowing trends, possibly driven by reduced import needs or increased use of local financing.
Key Highlights from the Banking Sector:
- Short-term external loans taken by Turkish banks surged by 42.9%, reaching $18 billion.
- Non-bank foreign currency deposits decreased by 4.4%, settling at $19.1 billion.
- Foreign banks’ deposits fell by 5.5%, dropping to $19.6 billion.
- Turkish lira-denominated deposits held by non-residents grew significantly, rising 34.9% to reach $20.4 billion.
Private and Public Sector Debt
Turkiye’s private and public sectors also saw varying degrees of change in their external debt levels:
- Private Sector: The short-term external debt of the private sector increased by 3.8%, bringing the total to $99 billion. The private sector now accounts for 59.7% of the country’s total external debt.
- Public Sector: Comprising entirely of state banks, the public sector’s short-term debt rose by 11.6% to $38.5 billion. This increase reflects the Turkish government’s efforts to secure short-term financing through public financial institutions.
Debt Composition and Remaining Maturities
Looking at the composition of Turkiye’s short-term external debt:
- 47.3% is denominated in U.S. dollars
- 21.5% is in euros
- 14.8% is in Turkish lira
- The remaining 16.4% consists of other foreign currencies
Furthermore, when including external debt with less than one year remaining maturity, the total debt figure climbs to $232.8 billion. Of this, $21.4 billion comes from the debts of Turkiye’s resident banks and the private sector’s overseas branches.
Special Focus: Private Sector and Public Borrowing
Breaking down the debt by borrower:
- The public sector accounts for 23.7% of total external debt, driven primarily by state banks.
- The CBRT holds 16.6% of the total.
- The private sector maintains a dominant share of 59.7%.
Within private-sector obligations, short-term debts owed to monetary institutions decreased by 1.4% to $94.7 billion, while non-monetary institutions saw a 2.1% decline to $77 billion.
Turkiye’s Steady but Monitored Growth
Turkiye’s short-term external debt remains at a relatively stable level of $176.1 billion, with a significant increase observed in the banking sector’s borrowing activity. The banking system’s increasing reliance on short-term external loans poses potential risks, especially in light of global interest rate movements and foreign exchange volatility.
Looking forward, analysts expect fluctuations in external debt levels to persist, influenced by global economic developments, particularly the actions of the Federal Reserve and the European Central Bank. Turkiye’s strategic management of its external liabilities will remain critical in maintaining financial stability amidst these challenges.
Stay updated as Turkiye continues to navigate its complex financial landscape with evolving trends in short-term external borrowing.
Source: NTV / Prepared by Irem Yildiz