Turkey to revive post-2001 crisis debt plan to help troubled firms - reports

Turkey’s parliament will consider a measure allowing companies to restructure or reduce large swathes of debt with banks, local media reported on Tuesday.

The scheme will resemble the ‘Istanbul Approach’, the pro-government Sabah newspaper said. The three-year plan was introduced after Turkey’s financial crisis in 2001 and helped thousands of large and small-scale enterprises avoid bankruptcy and repay loans under a consensual framework with banks.

The draft plan will allow restructuring of debts over two years, Sabah said.

Turkey is seeking to help the nation’s firms deal with a mounting pile of debt exacerbated by a currency crisis that peaked last year, a surge in interest rates and annual inflation of almost 16 percent. The crisis has resulted in a deep economic downturn.

The financial scheme could involve providing firms with additional capital, reducing or forgiving interest costs and late payment penalties and lowering the amount of total debts owed, Hürriyet newspaper said. Transactions agreed would be exempt from several taxes including stamp duties, foreign exchange charges and the KKDF tax, a charge paid to the Resource Utilization Support Fund.

The proposal will involve adding a temporary article to the Turkish Banking Law, Hürriyet said.

Other measures the parliament is due to approve include extending an existing scheme to the year-end allowing individuals to return cash to Turkey, no questions asked, in return for a 1 percent tax. The governing Justice Development Party (AKP) has a majority in the legislature thanks to an alliance with a smaller nationalist party.

The government is also seeking the means to help bolster its finances after the budget deficit more than tripled in the first five months of the year to stand at more than 80 percent of its year-end goal.