Turkish gov’t plans measures for $70 billion worth of bad loans - report

A new omnibus bill submitted to parliament by the Turkish government includes measures for 400 million lira ($70 billion) worth of bad loans for Turkish companies, Sözcü newspaper reported on Saturday. 

Reuters reported this week that the draft law introduced tax exemptions to loan restructurings and legal protection for bankers.

According to Sözcü, the amount of non-performing loans to be subject to those measures is almost 400 billion lira. Some 106 billion lira ($18.5 billion) of those loans which cannot be collected will be erased according to the bill, while 285 billion lira ($49.8 billion) worth of bad loans will be restructured, it said. 

Mustafa Savaş, a deputy of the ruling Justice and Development Party (AKP), said in parliament that the new restructuring plan named the “Istanbul approach” was devised for companies who had been facing difficulties in repaying their debts due to increases in inflation and interest rates that followed the depreciation of Turkish lira in August, when a a diplomatic crisis erupted with United States. 

The currency has fallen more than 20 percent this year. Ratings agencies including Moody’s and Standard & Poor’s have cited the debt problems when downgrading Turkey’s sovereign bonds further into junk territory.

Turkish firms are lumbered with more than $220 billion in foreign-denominated debt, while the known restructuring requests by Turkish companies total almost $20 billion. 

In April, Turkish Finance and Treasury Minister Berat Albayrak announced plans to establish an Energy Enterprise Guarantee Fund to secure credit from private banks to pay energy companies’ $13 billion debt, which with interest has reached $51 billion. According to Reuters, the government aims to do the same with construction loans.