Turkey Leans Heavily on Domestic Borrowing as External Debt Payments Mount

Turkey’s Treasury is increasingly turning to domestic borrowing to manage its rising external debt obligations. In July, the domestic debt rollover ratio surged to 157%, highlighting a growing dependence on local financial markets. Over the August–October period, a record-breaking domestic borrowing plan exceeding 1.1 trillion Turkish Lira is in the works.

According to official data from the Ministry of Treasury and Finance, between January and July 2025, Turkey repaid nearly $13 billion in external debt, while it secured only $8.75 billion through new external borrowing. Experts suggest the shortfall was covered by a significant uptick in domestic debt issuances, which have soared to record highs.

📈 July Sees Surge in Domestic Debt Rollover Rate

Burak Pırlanta, a research analyst at Gedik Investment, noted that in the first seven months of 2025, the government repaid 1.48 trillion TL in domestic debt while borrowing over 2 trillion TL, overshooting planned figures by roughly 150 billion TL. The average rollover rate, which stood at 130% from January to June, reached 157% in July, pushing the year-to-date average above 135%.

Citing reporting by Şebnem Turhan from Ekonomim, financial analysts point to the growing budget deficit as a key driver of the government’s domestic borrowing needs. As of June, the cash-based budget deficit had climbed to 1.28 trillion TL, while the primary deficit stood at 256 billion TL.

💰 1.1 Trillion TL Borrowing Plan for August–October

The Treasury’s financing program for the August-October period includes 859 billion TL in domestic repayments—368 billion TL in principal and 491 billion TL in interest. External debt obligations are projected to total around 168 billion TL during the same window.

In August alone, the Treasury is scheduled to pay 339 billion TL in domestic debt and 24 billion TL in external obligations, while aiming to raise 441 billion TL through eight domestic auctions, implying a monthly rollover ratio of 130%.

The projected 1.123 trillion TL in domestic borrowing for the three-month period represents a historic high. Net borrowing is expected to reach approximately 757 billion TL, marking a substantial increase in the Treasury’s reliance on local capital markets.

🔁 Internal Borrowing Supports External Repayments

Burak Pırlanta emphasized that the Treasury is using domestic borrowing to fund external debt payments. He noted that in the first seven months, the Treasury issued $4.5 billion in Eurobonds, €1.5 billion in Euro-denominated bonds, and $2.5 billion in lease certificates to manage external obligations.

Looking ahead, debt projections through May 2026 indicate that from July 2025 to June 2026, the Treasury will need to repay around 3.3 trillion TL in domestic debt—a figure that could rise with the issuance of short-term bonds. During the same period, external debt repayments are forecast to hit $21 billion. When factoring in the cash-based primary deficit, internal borrowing needs may climb to 4 trillion TL, averaging 350–360 billion TL per month.