TURKISH LIRA CRASHED AGAINST US DOLLAR..IS IT A FINANCIAL BANKTRUPCY?

Turkish Government lived Black Friday syndrome in 10/08/2018 when 1$ rised to 6,40 TL and Turkish credit default swap (CDS) rised up to 400. AfroTurk specialists name this situation as financial banktrupcy. But how Turkish financial system came to this point?

 

19 January – Credit ratings agency Fitch Ratings closed its Istanbul office, amid a torrent of negative comments by Erdoğan about the international firms that assess Turkey’s creditworthiness, saying it had become impossible to write analysts’ reports on which credit rating actions are based, a job that requires freedom of the press and freedom of speech

12 February – Yıldız Holding unexpectedly requested to restructure as much as $7 billion in loans.

21 February – Cemil Ertem, senior economic adviser to president Recep Tayyip Erdoğan, published an opinion piece in the Daily Sabahsuggesting that the International Monetary Fund's policy advice for Turkey's central bank to raise short term interest rates should be ignored and that "not only Turkey, but all developing countries, should do the opposite of what the IMF preaches."

7 March – Credit ratings agency Moody's Investors Service downgraded Turkey’s sovereign debt, warning of an erosion of checks and balances under Erdoğan, and saying that the Turkish military operation in Afrin, having strained ties with Washington and drawn the country deeper into the Syrian civil war, had added an extra layer of geopolitical risk.

5 April – Mehmet Şimşek, the deputy prime minister in charge of the economy, sought to resign due to disagreement with president Erdoğan about the latter's interference with central bank policy, but was later convinced to withdraw his resignation.

7 April – Doğuş Holding applied to its banks for debt restructuring. Doğuş’ outstanding loans stood at the equivalent of 23.5 billion Turkish lira ($5.81 billion) at the end 2017, up 11 percent from the year before.

18 April – President Erdoğan announced that the upcoming general election would be held on 24 June, 18 months ahead of schedule.

1 May – Credit ratings agency Standard & Poor's cut Turkey's debt rating further into junk territory, citing widening concern about the outlook for inflation amid a sell-off in the Turkish lira currency

14 and 15 May – In a televised interview with Bloomberg and in a meeting with global money managers in London, Erdoğan said that after the elections he intends to take greater control of the economy, including de facto control over monetary policy, and to implement lower interest rates; this caused "shock and disbelief" among investors about the central bank’s ability to fight inflation and stabilize the lira.

22 May – Turkish government dollar bonds traded at prices lower than those of Senegal.

 22 May – The Turkish Republic of Northern Cyprus (TRNC) government started discussing abandonment of the Turkish lira for another currency.

 23 May – The Central Bank of the TRNC banned public and private sector employees who do not receive their salaries in foreign currencies from taking out foreign currency loans, in an attempt to limit the damage of the plummeting lira

23 May – Foreign exchange bureaus in Istanbul temporarily stopped trading amidst an extreme dive in the price of the lira.On the same day, the Turkish Statistical Institute reported another slip in consumer confidence over the month of May, with all sub-indices decreasing. On 25 May, it reported a sharp drop in confidence in Turkey’s services, retail trade, and construction sectors over the month of May.Also on the same day, the Central Bank of Turkey raised interest rates at an emergency meeting of its Monetary Policy Committee, bowing to pressure from financial markets. The central bank raised its late liquidity window rate by 300 basis points to 16.5 percent.Taken against the vociferous objections of Erdoğan, this step brought temporary relief for the lira exchange rate.

26 May – Erdoğan at a campaign rally threatened "the finance sector" with indeterminate sanctions if it does not rescue the flagging lira, and implored his supporters to change any foreign-currency holdings into lira.

28 May – Turkey's central bank announced an operational simplification of its monetary policy, effective 1 June, coming with the announcement of another interest rate hike. The one-week repo rate, at 8 percent—currently not used—is to be raised to 16.5 percent and become the future benchmark of monetary policy. The current benchmark late liquidity window rate, now at 16.5 percent, will be fixed at 150 basis points above the one-week repo rate, which would now be 18 percent. The lira somewhat firmed in response.

28 May – Jordan terminated its free-trade agreement with Turkey, which had lately seen Turkish exports to Jordan increase fivefold

30 May – Credit ratings agency Moody's Investors Service lowered its estimate for growth of the Turkish economy in 2018 from 4 percent to 2.5 percent and in 2019 from 3.5 percent to 2 percent

30 May – The Turkish Statistical Institute reported economic confidence sliding steeply in May to a value of 93.5, the lowest level in 15 months, since the aftermath of the 2016 coup attempt.

30 May – GAMA Holding sought to ease repayment terms for $1.5 billion of loans with creditors.

30 May – Turkey's central bank released minutes of the crucial 23 May Monetary Policy Committee meeting, saying that “the tight stance in monetary policy will be maintained decisively until the inflation outlook displays a significant improvement and becomes consistent with the targets”, the latter being 5 percent by law.

The Turkish lira has a history of accelerating loss of value relative to the euro, breaching the mark of five lira per euro in early 2018

1 June – The Istanbul Chamber of Industry published its index of manufacturing in Turkey for the month of May, revealing that with a sharp drop for the second consecutive month, manufacturing conditions deteriorated to the worst since 2009, elaborating that "inflationary pressures remained marked in May, cost burdens continued to rise in the manufacturing sector."

4 June – Turkey’s statistics institute reported the annual inflation rate for May as risen to 12.2 percent from 10.9 percent the previous month, just below a 14-year high of last November, while monthly inflation was 1.6 percent.

6 June – At the Borsa Istanbul, Turkey’s main stock index BIST-100 dropped 1.5 percent to the lowest level in dollar terms since the global financial crisis in 2008.

6 June – Bloomberg reported that Astaldi, an Italian multinational construction company, was poised to sell its stake in the flagship Yavuz Sultan Selim Bridge project for $467 million.The project had failed to meet projections, requiring Ankara to boost operators' revenue from treasury coffers, and since early 2018, the partners in the joint venture had sought restructuring of $2.3 billion of debt from creditors.

7 June – Credit ratings agency Moody's Investors Service downgraded and placed on review for further downgrade the ratings of 17 banks in Turkey, reasoning "that the operating environment in Turkey has deteriorated, with negative implications for the institutions’ funding profile."Also on 7 June, Moody's put eleven of Turkey’s top companies under review, because their credit quality was correlated in varying degrees to the government in Ankara. The firms included Koç Holding, Turkey’s biggest industrial conglomerate, Doğuş Holding, which has applied to banks to restructure some of its debt, and Turkish Airlines.

7 June – Turkey's central bank at its regular Monetary Policy Committee meeting raised its benchmark repo rate by 125 basis points to 17.75 percent. The move beat market expectations, resulting in immediate gains for the lira, and the yield on the benchmark 10-year lira bond eased, after touching a record-high 15.41 percent on 6 June.

10 June – Turkey's Automotive Manufacturers Association published data for the month of May, showing car sales sliding to the lowest level since 2014. Passenger car sales slumped by 13 percent when compared to May 2017, while sales of commercial vehicles dropped 19 percent.

11 June – Turkey's central bank released financial data for April, with the current account deficit widening by $1.7 billion to $5.4 billion, and the rolling 12-month deficit to $57 billion (6.5 percent of GDP), as imports continued to outpace exports. Portfolio inflows slumped to a negative $502 million in April and slid to $1.8 billion for the accumulated first four months of the year from $5.7 billion a year earlier.

13 June – Turkish President Recep Tayyip Erdoğan’s senior economic adviser Cemil Ertem in an opinion piece in the Daily Sabah argued the unorthodox idea that it would be wrong to see inflation as a monetary phenomenon,leading to a sharp slide in the value of the lira and of Turkey's benchmark 10-year lira bonds, with yields on the latter reaching a record-high of 16.25 percent.

14 June – Turkish President Recep Tayyip Erdoğan in a televised interview said that his government would "conduct an operation against" international credit ratings agency Moody's Investors Service following elections on June 24. The next day, the lira finished its worst week since 2008, tumbling 5.7 per cent relative to the dollar, while also hitting its worst weekend close ever at 4.73 USD/TRY.

18 June – Credit ratings agency Fitch Ratings lowered its estimate for growth of the Turkish economy in 2018 from 4.7 percent to 3.6 percent, citing reasons including an anticipated reduction in government stimulus

24 June – In the Turkish general election, Erdoğan retained the office of president while his Justice and Development Party (AKP) narrowly lost its majority in parliament but achieved such majority together with its alliance partner the Nationalist Movement Party (MHP). The day after, the Turkish Industry and Business Association (TÜSİAD) urgently called for economic reforms.

26 June – The European Union's General Affairs Council stated that "the Council notes that Turkey has been moving further away from the European Union. Turkey’s accession negotiations have therefore effectively come to a standstill and no further chapters can be considered for opening or closing and no further work towards the modernisation of the EU-Turkey Customs Union is foreseen.

28 June – The Turkish Statistical Institute reported its economic confidence index dropping in June for the fifth straight month, with construction sector confidence leading the declines.

The debt default of Türk Telekomwas Turkey's biggest ever.

3 July – The Turkish Statistical Institute reported that Turkey’s annual inflation rate surged to 15.4 percent in June, the highest level since 2003. Consumer price inflation climbed 2.6 percent month-on-month in June, exceeding annual price increases in many developed economies. Turkey’s annual inflation rate now was about four times the average in emerging markets. Producer price increases accelerated to 23.7 percent from 20.2 percent the previous month.On the same day, the Automotive Distributors Association said that sales of the commercial vehicles sank 44 percent in June from June 2017, while car sales fell 38 percent.

5 July – Bloomberg reported that Turkish and international banks were taking control of Türk Telekom, Turkey’s biggest telephone company, due to billions of dollars in unpaid debt. Creditors set up a special purpose vehicle to acquire the company as they try to resolve Turkey’s biggest-ever debt default. The same day, Bereket Enerji group was reported seeking buyers for two power plants as it negotiates with banks to refinance $4 billion in debt.

9 July – Erdoğan appointed his son-in-law Berat Albayrak as economic chief of his new administration, in charge of a new ministry of treasury and finance. Erdoğan also appointed Mustafa Varank, a close adviser who had overseen a pro-government social media team on Twitter and elsewhere, to industry minister, the other key economy portfolio.These announcement fueled investor unease about competence and orthodoxy of economic policymaking, with the Turkish lira losing 3,8 percent of its value within one hour after Albayrak's appointment.Same day, Erdoğan appropriated to himself, by presidential decree, the right to hire the central bank governor, deputies and monetary policy committee members for a four-year term, thus completing the politicization of the once-respected and independent central bank.

11 July – The lira dropped 2.5 percent to 4.82 per dollar, its weakest level since falling to an all-time low of 4.92 against the U.S. currency in May. The stock market in Istanbul dropped 5.2 percent to 91.290 points. Yields on government debt surged.The next day, the lira touched an all-time low of 4.98 lira for a US dollar.Two days later, the lira recorded its biggest weekly slump in almost a decade. The benchmark Borsa Istanbul 100 Index fell the most since the foiled coup in 2016, with the selloff dragging price-to-estimated earnings valuations to the lowest in more than nine years. The 10-year government bond yield surged almost 100 basis points this week.

13 July – Credit ratings agency Fitch Ratings downgraded Turkey's debt rating with negative outlook, reasoning that "economic policy credibility has deteriorated in recent months and initial policy actions following elections in June have heightened uncertainty (...) Monetary policy credibility has been damaged by comments by President Erdoğan suggesting a greater role of the presidency in setting monetary policy after the elections (...) Monetary policy has persistently been unable to bring inflation near its 5% target and inflation expectations have become unanchored. Key figures from the previous administration with reformist credentials were excluded from a new cabinet, appointed on 9 July, while the son-in-law of the president was appointed as Minister of Treasury and Financ

19 July – ÇEL-MER Çelik Endüstrisi, a leading Turkish steel producer also operating in the automobile sector, agriculture, white goods, machinery production and the defence industry, sought bankruptcy protection from the courts after it failed to repay its debts.

20 July – Ozensan Taahhut, a large Turkish construction company which has carried out construction contracts for state housing authority TOKI, the Justice Ministry, the Health Ministry and various municipalities, filed for bankruptcy protection.

24 July – The Central Bank of Turkey at a meeting of its Monetary Policy Committee unexpectedly left the benchmark interest rate for its lending unchanged at 17.75 percent despite the latest hike in inflation, leading to a selloff in the lira currency as well as in Turkey’s dollar-denominated government bonds and in Turkey's stock market. In the words of Brad Bechtel, global head of foreign exchange at US investment bank Jefferies, the central bank’s decision to hold rates left Turkey as "the pariah of emerging markets".

26 July – European rating agency Scope Ratings placed Turkey's BB+ sovereign ratings on review for downgrade, citing i) "Deterioration in Turkey’s economic policy and governance framework both before and in following the June election, which weigh on the effectiveness and credibility of fiscal, monetary and structural economic policy management" alongside ii) "Increasing downside risks to Turkey’s macroeconomic stability stemming from external vulnerabilities

27 July – At their summit in Johannesburg between July 25 and July 27, BRICS countries rejected Erdoğan's desire for Turkey to join the bloc.

31 July – Turkey’s central bank acknowledged it won’t meet its 5 percent inflation target for three more years, disappointing investors seeking signs that monetary policy would tighten. Although Governor Murat Cetinkaya pledged to raise borrowing costs when needed, he predicted 13.4 percent inflation through this year, 9.3 percent through 2019 and 6.7 percent by the end of 2020. The same day, the Turkish lira heading for its longest streak of monthly losses since an International Monetary Fund bailout in 2001, the Banks Association of Turkey (TBB) drew up a framework of principles for restructuring loans that exceed 50 million lira: If lenders with exposure to at least 75 percent of the total owed agree, a committee of lenders should order measures such as changes to shareholder structure and management, asset sales, spinoffs and capital injections, resolving restructurings within 150 days.

1 August – Due to the weakening lira, Turkey’s state pipeline operator BOTAŞ raised the price of natural gas used by electric power plants by 50 percent. BOTAŞ also raised natural gas prices for residential use. The same day, the energy regulation authority raised electricity prices for industrial and residential use. Also the same day, the Istanbul Chamber of Industry said in a monthly survey of manufacturers that producer price inflation in July accelerated to the highest pace in more than a decade, after already having accelerated to 23.7 percent in June due to the Erdoğan government stimulating economic growth with a series of measures ahead of elections on June 24.

3 August – The Turkish Statistical Institute reported that Turkey’s annual inflation rate increased to 15.9 percent, from 15.4 percent in June, extending the highest level since 2003. Producer price inflation climbed to 25 percent from 23.7 percent in June.

9 August – Late in the day, Erdoğan in a speech called upon supporters not to pay heed to "various campaigns under way against Turkey", adding: "If they have dollars, we have our people, our righteousness and our God. As these remarks reduced markets’ hope that the Turkish government were willing to tighten monetary policy or begin economic reform, throughout the night and into the next morning, the lira in a dramatic fall lost almost 10 percent of its value, touching the mark of 6 lira for a US dollar

10 August- Turkish Credit Default Swap (CDS) jumped over the riskiest level 400 and USD/TRY reached to 6,46

10 August – The European Central Bank voiced increased concerns about the exposure of some of the Euro currency area’s biggest lenders to Turkey – chiefly BBVA, UniCredit and BNP Paribas – in light of the lira’s dramatic fall. On the same day, the US government started "a bullet a day" economic sanctions against Turkey, designed to effect the release of US citizen Andrew Brunson and 15 others, held as political hostages (on charges described as a sham by U.S. officials) by the Turkish government.

News Date: 13 / 08 / 2018
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