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Turkey's external debt lifts US-dollar rate

Forecast: US-dollar will continue to rise

Baku. 6 December. REPORT.AZ/ Crisis observed in Turkey's foreign exchange market in last two months is expected to continue for a while. Report informs, after the increase of 20% in last 2 months dollar in Turkey rose to 3.60 TRY/USD then after a few days declined to a level of 3,52-3,54 TRY/USD.

The reason for the increase in the dollar sharply is the factor of higher foreign debt of the corporate sector. Thus, at the beginning of September 2016, the external debt of Turkey's private sector increased by 15% compared with the same period last year and reached 210.5 bln USD. This equals to 30% of the country's economy at the current rate. Against the background of the rise of the dollar companies as far as possible purchase foreign currencies, mainly dollars and try to pay off the debt. In addition, transfer of lira into dollar by citizens also accelerated rate increase.

Notably, According to the Central Bank of the Republic of Turkey, foreign currency reserves decreased by 2.2% up to the 99.035 bln USD. This is 2 times more than corporate sector's foreign debt.

Turkey, credit rating of which lowered by international rating agencies, now must take loan with higher interest rate in order to repay debts.

In addition, the "hot money" in Turkey, ie the funds in the financial markets continue to leave the country. Thus, in the last month 2.7 bln USD in Turkey's financial markets has left the country.

The funds continue to emerge from bond market, the stock exchanges, as well as private corporate bonds.

By adding Turkey's budget deficit and balance of payments deficit to these factors, there is no reason to avoid an increase in the dollar.

Analytical Group of Report expects that US-dollar will rise again to 3.70 TRY/USD and Central Bank of Turkey will have to increase interest rates. However, in long-term it will not be a solution and dollar will continue to rise. In general, there is 15% annual average increase in dollar in Turkey. In the short term exchange rates will decline to 3.45 TRY/USD.

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