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Debt ordeal hovers over Turkey’s ‘megaproject’ builders

Companies involved in Turkey’s “megaprojects” have incurred some of the worst damage that the slump of the Turkish lira caused on foreign loan liabilities in the private sector.

Saddled with two-thirds of the country’s external debt stock, the Turkish private sector is going through a rough patch amid the slump of the Turkish lira, which has badly exacerbated foreign loan liabilities. Nonfinancial or real sector companies, in particular, are losing sleep each time foreign exchange prices go up, as they hold 36% of Turkey’s external debt, which totaled $434 billion in 2019.

For companies indebted in hard currency, the uptick in exchange rates means they need to put larger sums in liras aside to repay their loans, which, in turn, means accumulating foreign exchange losses. In its first inflation report for the year, the central bank outlines the scale of the corporate ordeal, based on a study of the balance sheets of about 300,000 companies. Accordingly, foreign exchange losses have come to account for up to 14% of the costs of companies in recent years. Beyond this average figure, the ratio reaches up to 30% in some sectors and companies. 

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