Turkey to set up $74B fund to solve cash flow problem

By Bahattin Gonultas

ANKARA

Turkey will set up a fund to the tune of up to 250 billion Turkish liras ($74.3 billion) to relieve cash flow problems of Turkish businesses, Prime Minister Binali Yildirim said on Thursday.

Speaking at a press conference about the announcement of the Economic Coordination Committee's decision, which held a meeting last week, Yildirim said the committee had taken some measures to accelerate economic growth and minimize foreign exchange volatility.

He said the new fund, under the Treasury's guarantees, would help the banking system re-accelerate its credit growth.

The move came after the Turkish lira hit a record low against the U.S. dollar in November. The national currency plunged about 7 percent since mid-November, hitting new lows almost daily last week.

The premier also said the government would give 15 percent additional incentives to any investments in the production sector. "We will refund VAT [value-added tax] on construction investments," he said.

Yildirim said the government would also increase the capital of the Turkish Eximbank to boost the country's exports.

He also said the Turkish banking watchdog had agreed to allow the country's banking sector to restructure loans to the real sector

"The government will continue to maintain a strong fiscal discipline," he said, adding: "The schedule has been drawn up for structural reforms, which aims to limit the state's role next year."

He said the deposit rate limit for state banks had been set at 7.5 percent to reduce borrowing costs in the country.

State institutions will avoid contracts in foreign currencies unless "absolutely necessary”, the prime minister added.

He also said fluctuations in the market due to "global conditions" such as the U.S. Federal Reserve rate hike expectation would be "temporary".

On Dec. 3, the country's Economic Coordination Board gathered to discuss the recent developments with the participation of Yildirim and the country's top economic officials, including Deputy Prime Minister for Economic and Financial Affairs Mehmet Simsek.