Turkey’s Private Sector Foreign Debt Rises to $199.3 Billion by End of July

By the end of July, Turkey’s private sector foreign debt stock climbed to $199.3 billion, reflecting a monthly increase of $2.5 billion, according to the latest figures released by the Central Bank of the Republic of Turkey (TCMB). The data underscores ongoing reliance on external borrowing by both financial and non-financial institutions, with longer-term debt remaining the dominant component.

Long-Term vs. Short-Term Borrowing Trends

Breaking down the figures, the long-term debt stock rose by $2.1 billion, reaching $188.6 billion, while the short-term debt stock—excluding trade credits—increased by $0.4 billion to $10.8 billion.

The report highlights that long-term borrowing continues to account for the overwhelming share of private sector foreign liabilities. This composition provides some stability in terms of rollover risks but also reflects exposure to external interest rate fluctuations.

Institutional Borrowing: Financial vs. Non-Financial

The Central Bank’s statement provided further detail on institutional borrowing:

• Financial institutions saw their total external debt rise by $3.2 billion in July.

• Non-financial institutions, in contrast, experienced a decrease of $0.7 billion in their overall foreign debt position.

This divergence reflects the shifting dynamics of external borrowing in Turkey. Financial institutions, particularly banks, have been more active in securing long-term funding, while some non-financial corporations appear to be deleveraging or reducing foreign borrowing exposure.

Specifically:

• Long-term foreign debt of financial institutions grew by $2.9 billion.

• Long-term foreign debt of non-financial institutions fell by $0.8 billion.

• On the short-term side, financial institutions added $0.3 billion, while non-financial firms registered a $0.1 billion increase.

These movements reveal that banks and other financial entities remain the key drivers of Turkey’s rising external debt burden.

Currency Composition of Foreign Debt

The TCMB also broke down foreign borrowing by currency, underscoring the dominance of U.S. dollar-denominated debt:

• Of the $188.6 billion long-term debt, 58.2% was in U.S. dollars, 32.2% in euros, 2.0% in Turkish lira, and 7.6% in other currencies.

• Of the $10.8 billion short-term debt, 30.7% was in U.S. dollars, 20.5% in euros, 47.2% in Turkish lira, and 1.6% in other currencies.

The data highlights a striking contrast: while long-term borrowing is overwhelmingly dollar- and euro-denominated, short-term borrowing is dominated by the Turkish lira. This difference reflects both the preferences of international lenders and the borrowing strategies of domestic institutions.

Maturity Profile: One-Year Outlook

The report also provided an overview of foreign debt repayments due within the next 12 months, a critical indicator of rollover and liquidity pressures. As of July, total foreign debt maturing within one year amounted to $59.4 billion.

This near-term debt was distributed as follows:

• $38.7 billion owed by banks,

• $15.8 billion owed by non-financial corporations,

• $4.9 billion owed by non-bank financial institutions.

The figures suggest that the Turkish banking sector faces the heaviest short-term external debt burden, which may pose challenges if global financing conditions tighten.

Broader Economic Context

Turkey’s reliance on foreign borrowing has long been a structural feature of its economy, reflecting persistent current account deficits and high external financing needs. The latest rise in private sector foreign debt comes at a time when global interest rates remain elevated, increasing borrowing costs for emerging markets.

While the extension of maturities provides some cushion against short-term volatility, the sheer size of external debt means that Turkish institutions remain sensitive to shifts in investor sentiment, exchange rate fluctuations, and geopolitical risks.

Analysts note that the rising debt burden of financial institutions may reflect efforts to secure foreign currency liquidity in advance, while the slight decline in non-financial corporate debt could be linked to cautious borrowing amid uncertain global conditions.

What This Means for Investors and Policymakers

For policymakers, the key challenge lies in managing rollover risks while maintaining investor confidence. With $59.4 billion in repayments due within a year, ensuring smooth refinancing is essential to avoid pressure on the lira and foreign exchange reserves.

For investors, the currency composition of Turkey’s foreign debt highlights continued exposure to exchange rate risks. Although lira-denominated short-term borrowing provides some balance, the heavy reliance on dollar- and euro-denominated long-term borrowing ties Turkey’s financial stability closely to global monetary conditions.