Turkey’s exporters may come face to face with a “gangrenous” financing crunch that could threaten the country’s export-led growth ahead of elections, Bloomberg said on Tuesday citing comments by a top business group.
Financing issues for firms, stemming from developments at the central bank, are being exacerbated by new curbs on lira loans for companies deemed to be holding excess foreign currency, said Istanbul Chamber of Industry Chairman Erdal Bahcivan, Bloomberg reported.
Other complications for exporters include getting loans from the state-run Export Credit Bank of Turkey, Bahcivan said.
“Industrialists are facing a financing bottleneck,” he said. “If these issues are not addressed immediately, we will see repercussions in exports and production very soon.”
Turkey has sought to bolster the lira’s value following a currency crisis last year by introducing measures to curb the attractiveness of foreign currency and curb access to it. The lira lost 44 percent of its value in 2021 and is down about 20 percent against the dollar this year. President Recep Tayyip Erdoğan must set a date for presidential and parliamentary elections of June next year at the latest.
International ratings agencies and some analysts have termed the government’s measures as currency controls, though Turkey says the lira is free floating and that it upholds the principles of the free market. It has made the steps while instructing the central bank to cut interest rates then hold them steady despite surging prices.
Erdoğan’s approval rating among voters has declined due to the currency volatility, which has made imported consumer goods much more expensive, and a surge in inflation. The consumer price inflation rate hit 78.6 percent in June, the highest level since 1998. The central bank’s benchmark interest rate stands at 14 percent.
The lira was trading down 1.3 percent at 17.22 per dollar on Wednesday.
Last month, Erdoğan said that the central bank’s next rates move would be downwards. Turkey’s Islamist president says higher interest rates are inflationary and contradict with his religious beliefs.
Tuncay Özilhan, head of the Anadolu Group and chairman of the High Advisory Council of the Turkish Business and Industry Association (TÜSİAD) in June urged the government to seek the advice of experts on the economy. TÜSİAD represents Turkey’s largest industrial groups.