Turkish Eurobond bailout is non-starter – Sinkamba
By Staff Reporter
Opposition Green Party President Peter Sinkamba says the Turkish Eurobond refinancing is unlikely to take-off because of deteriorating trade war between Turkey and the United States.
Sinkamba says the Zambian government should just as well forget about the Turkish bailout due to rapid decay in the Turkish economy.
He has since advised the Zambian Government to come to terms with realities by seriously considering other options to sort out the Eurobond gig-saw puzzle.
“At the moment, the Turkish Eurobond bailout is a non-starter. The economy of that country has gotten into serious shambles following President Trump’s doubling of trade tariffs on aluminum and steel. The Turkish Lira has since been hit hard forcing it to slide rapidly downwards against the US dollar,” said Sinkamba.
He cited the recent move by the Turkish government to slash its economic growth forecast for this year from 5.5% to 4% as proof that things were deteriorating in that country.
“The slump is likely to be much worse if the trade was fallout and currency confidences are not restored quickly. This can be deduced from the expression of concern by the European Central Bank about eurozone banks’ exposure to Turkey arising from the rapid loss of value of the Lira. Believe you me, Turkey is sliding into a debt crisis. The writing is clearly on the wall for all to see,” he said.
Sinkamba added that the unfolding scenarios will force Turkey to implement not only currency controls but also ask for a bailout from the International Monetary Fund.
He cited the recent move by Turkish President Recep Tayyip Erdogan who urged the Turkish people to exchange dollars and euros for lira in order to defend the currency as a signal of the beginning of tight currency and monetary measures.
“The measure announced by Erdogan last week to defend the currency is a signal of the beginning to tighter currency and monetary policy controls. There is every reason to believe that the Turkish government may soon introduce emergency interest rate hikes during the current currency crisis as a means to provide short-lived reliefs. There is also every reason to believe the Turkish government may restrict export of hard currency from that country,” he added.
“If economic events in Turkey continue on this trajectory, then the Zambian Government should forget about the anticipated Eurobond bailout. Currency intervention measures will definitely make any Eurobond bailout from Turkey to be way too expensive for Zambia to contemplate.
“Secondly, data from the Bank for International Settlements show eurozone banks have loans worth over $150 billion in Turkey which they plan to recall soon. So, Turkey will soon be forced to marshal all resources available to sort out its own loans. For this reason, I doubt that the Turkish government will prioritize sorting out Zambia’s Eurobond loans rather than sort out its own serious mess,” said Sinkamba.