Turkey fought long battles with the International Monetary Fund before and after the Justice and Development Party took power in the country, until it won the battle by paying the last payment in 2015, after 52 years of suffering due to its debts with the Fund.
A few days ago, Turkish President Recep Tayyip Erdogan stressed at the seventh conference of the Justice and Development Party that his country does not owe the International Monetary Fund "even one penny," noting that the current reserve of the Turkish central bank exceeds $ 95 billion.
Al-Jazeera Net presents the story of Turkey with the IMF in the form of a question and answer:
How was Turkey able to zero its debts with the IMF?
In mid-2015 Erdogan, who was then prime minister, announced that his country was able to pay all its debts owed to the International Monetary Fund, with which it had a tense past, which made it a member of the club of non-indebted countries of the international institution, and said, "Turkey managed after a long time from Full payment of its debt to the International Monetary Fund. "
Thus, Turkey became for the first time debt free to the IMF in 52 years.
In an interview with Al-Jazeera Net, Muhammad Klopp, an economic researcher at Yildirim Beyazit University, attributed Turkey's success in settling its debts with the IMF to 3 factors:
Economic and political stability and the consequent jump in the gross domestic product (GDP) doubled in the period 2002-2008 from approximately 250 billion dollars to 770 billion dollars annually.
Liberation from the IMF restrictions on government spending as well as borrowing in 2008, which provided the opportunity for unconditional spending and borrowing, and this led the Turkish government to focus on infrastructure projects that created an opportunity for accelerated economic growth.
The decrease in the value of public debt from 45% to 35% of GDP, as a result of the economic jump and its positive effects on government revenues and the balance of the Turkish Central Bank.
How big was Turkey's debt to the fund?
Turkey was owed by the fund more than 16 billion dollars until 2002, when the Justice and Development Party took over the government in the country, and the Turkish economy between 1981 and 2002 suffered from severe waves of recession, which pushed the economic system to ranks very late in the list of world economies, no Especially the financial crisis in 2001, where development rates fell frighteningly, and unemployment, disability and inflation rates rose, which ranged in the 1990s between 70% and 90%.
The Turkish budget deficit during that year reached 16%.
The public debt has reached 74%, the national income has decreased to great levels, reaching 180 billion dollars, and the value of the Turkish currency has decreased by 100%.
In the era of justice and development, borrowing was carried out from the IMF during two periods, the first was in 2002 and ended in 2005 with nearly 12 billion dollars, followed by the period of renewal of the signing of the subsidy program in 2005, which in turn ended in 2008 with approximately 6 billion dollars. Turkey only used $ 4.5 billion of it, according to data released by the International Monetary Fund.
Why does Erdogan insist on removing from the monetary fund?
Erdogan refuses to resort to the IMF for three main reasons, according to economic researcher Klopp:
Because of his belief that resorting to the International Monetary Fund will force the government to follow a contractionary spending policy that will stop the wheel of economic growth.
The goal gap between the monetary fund on the one hand and the vision of the Turkish president on the other hand, as the fund requires reliance on interest, and this means that the central bank will be forced to raise the interest rate without a ceiling in light of Erdogan's strong opposition to raising interest rates and encouraging him to reduce them to drive economic growth in the country. Which will not be achieved if Turkey turns to the IMF.
For fear of external parties using the IMF paper to pressure the Turkish government to concede on some regional political issues.
An exchange store in the capital, Ankara (the island)
What is the size of Turkey's internal and external debt in general?
According to the public debt report of the Turkish Ministry of Finance for the year 2020, the volume of local government borrowing has doubled during the last four years, reaching 468 billion Turkish liras (about 62 billion dollars) in 2016, and gradually increased to reach nearly 800 billion Turkish liras (about 106 billion dollars). In the year 2020.
As for foreign debt, the Turkish Ministry of Treasury and Finance announced in a statement that Turkey’s total external debt amounted to $ 431 billion at the end of 2020. The ministry said that the ratio of external debt to GDP reached 56.9% last December, and net foreign debt reached The country has 256.5 billion dollars, or 33.8% of the GDP
According to data published by Bloomberg, the total foreign debt secured by the Treasury amounted to $ 14.2 billion as of the end of last March.
The balance of the general government debt set by the European Union was about 1.55 trillion Turkish liras ($ 235 billion), or 35.1% of GDP at the end of last March, and the net public debt reached 782.2 billion Turkish liras (118 billion dollars) in the same month. .
The deficit in the current account of Turkey until the end of last year was about 30 billion dollars, which means - according to experts' estimates - that Turkey's need for external financing will reach 195 billion dollars.
The impact of internal and external debt on the local economy?
In the context, economic researcher Klopp said that external borrowing poses a challenge to countries that suffer from a continuous decline in their local currency, such as Turkey, as the cost of debt rises with a decrease in the value of the currency, in addition to other concessions that the state can offer to lenders.
As for domestic borrowing, especially in local currency, it - according to Klopp - immunizes the state from fluctuations in the exchange rate, as well as removes economic and political pressures on the shoulders of the government.
But what is wrong with the domestic debt is its negative side effects on income distribution, and the state’s competition with the private sector to obtain the necessary financing from financial institutions, which affects growth and does not meet the monetary needs of the private sector.
Despite the drawbacks of this option, it is currently the best option for Turkey, provided that the exchange rate and inflation are maintained.