Government suspicious about private sector debt

ANKARA - Hürriyet Daily News

Turkey’s public debt is on a downward trend, while the private sector’s debt has risen over the last 10 years. However, things may not be as they seem in the case of private sector debt, according to Deputy Prime Minister Ali Babacan.

“We are not so sure about the real level of the external national indebtedness of Turkey,” he said at a parliamentary session on Nov. 23, according to Anatolia news agency.

A substantial part of what seems like private sector debt is in fact the private sector’s own money, he claimed, hinting at a possibility that this may be indicating tax evasion.

The ratio of public net debt stock to gross domestic product (GDP) dropped to 22.4 percent in 2011 from 61.5 percent in 2002, according to data from the Undersecreteriat of the Treasury. The ratio of private sector debt to the GDP, meanwhile, increased to 26.6 percent in 2012 from 18.7 percent in 2002, Babacan said.

It is hard to explain how the real sector receives so many loans from abroad, according to Babacan. His theory is that company owners who have parked their own money abroad put up their foreign bank accounts as collateral and enable their company to obtain loans there.

“They may be doing this for tax management or to avoid disclosing their wealth in Turkey,” he said. “Turkey’s creditors see that, too. That’s why the Turkish private sector is able take loans in big amounts and so easily … So we think that there is a serious amount of personal assets and a collateral system.”

The sustainability of Turkey’s indebtedness does not pose a problem even in worst case scenarios, Babacan said, adding that the government wanted to improve the net debt stock even further to 31 percent, down from 36 percent.