The Turkish Government and the IMF are reportedly close to reach an agreement over a new funded facility. Accordingly, the Fund would offer US$19bn, while the Government was reportedly asking for US$20-40bn. However, the type of the facility is still unknown and widely debated between a disbursing stand-by and a precautionary stand-by. The markets are eagerly following the developments.
On the economic front, the trade deficit started to narrow, while the Central Bank surprisingly cut O/N borrowing rate by 50bps to 16.25% and O/N lending rate by 100bps to 18.75% (the latter became the reference rate as the Bank has been injecting TRY liquidity to the financial systems for a while now through repos). The Bank underlined that weak demand conditions should counterbalance inflationary pressures from FX pass-through effect, while falling commodity prices should favour disinflation process. Hence they could further reduce the spread between borrowing and lending rates.
Meanwhile, markets remained extremely volatile but are slightly recovering with the ISE-100 index increasing by 1.2% in the last two weeks, while yields on the benchmark bond declined by 173bps to 20.54% and TRY appreciated by 2.38% against the USD to 1.5946.
The Turkish Newsletter (104 ko)