Turkish businessmen complain about debt, lira crisis

Businessmen in Turkey’s industrial heartlands are complaining about a crisis in the currency markets and its impact on their foreign currency debt days before elections.

In Kayseri, company directors such as Halit Ozkaya, the chairman of cable-maker Has Celik, aren’t revealing who they will vote for in presidential and parliamentary elections on Sunday, according to a report in Bloomberg.

“The magnitude of the lira’s swings is putting us in trouble by killing predictability and creating uncertainty on debts repayment,” Ozkaya said from the industrial city of Kayseri, where almost seven out of 10 voters backed Erdoğan in 2015 elections.  

The lira has slumped about 20 percent against the dollar this year, making more than $225 billion of foreign currency-denominated loans more difficult for businessmen to repay. The lira fell to a record low of 4.92 per dollar in May, sparking fears of a meltdown, after President Recep Tayyip Erdoğan explained to investors in London how higher interest rates caused inflation and said he’d lower them if he wins the vote.

Kayseri was also a traditional home to supporters of the Fethullah Gulen movement, a clandestine organization that Erdoğan blames for orchestrating an attempted military takeover in July 2016. Businessmen with close links to Gulen’s loosely-knit network have had tens of billions of dollars in assets seized as part of a subsequent crackdown on the group and other opponents of Erdoğan.

In Gaziantep, to Kayseri’s east, businessmen are equally concerned, writes Bloomberg’s Asli Kandemir and Cagan Koc.

“It’s a fact that recent currency volatility upset people who produce,” said Mehmet Tuncay Yildirim, chairman of the chamber of commerce in the southeastern border city of Gaziantep. “Investors, industrialists fear uncertainty. If the exchange rate will stabilize, they can take positions accordingly.”

Turkey’s central bank was forced to raise interest rates by 425 basis points to 17.75 percent in May and June in an effort to stem the lira’s decline. After initially strengthening, the currency lost about 5 percent last week to trade at 4.73 per dollar. Volatility remains high, making it more difficult for companies to make business decisions, agree loans and agree import and export contracts.

Taner Ozdurak, who runs Gaziantep-based textile company Ozdurak Tekstil Sanayi ve Ticaret, wants to increase sales of yarn to Poland and Spain to 20 percent of turnover by 2020 from almost nothing now.

“This will be a natural hedge mechanism to protect us against volatility at home,” he said.

Still, Kandemir and Koc said you’ll struggle to find anyone in Anatolia openly blaming Erdoğan for the market turmoil. Instead, they tend to echo Turkey’s president and direct their wrath at the central bank, ratings agencies and foreigners.

“We need a leader who bangs his fist on the table in front of Europe,” said Ali Gunduz, a 54-year-old shopkeeper. “Foreign powers are hurting our economy, but after the elections things will be much better.”

https://www.bloomberg.com/amp/news/articles/2018-06-18/in-erdogan-heartland-lira-crisis-is-taking-toll-on-businesses?__twitter_impression=true