Factbox: Fallout for consumers, businesses and banks in Turkey as the pound collapses

A money changer holds Turkish lira banknotes at an exchange office in Ankara, Turkey on October 12, 2021. REUTERS / Cagla Gurdogan

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ISTANBUL, Nov. 24 (Reuters) – A historic fall in the Turkish lira leaves consumers with higher prices, rising cost of living and even product shortages, as foreign debt rises for businesses and Protective cushions are put to the test in banks.

The pound recovered some losses after Tuesday’s 15% crash to record lows, spurred by President Tayyip Erdogan’s defense of rate cuts, but volatility and steep price hikes still worried consumers and investors . Read more

The woes of the pound are seen to impact in the following ways:

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The weak pound and rising prices will hit low-income Turks harder as the value of their income erodes sharply. Richer Turks with foreign currency assets will be partially protected from the currency crisis.

Commodities will be affected. Turkish milk producers on Wednesday called on the government to increase the price of wholesale milk by up to 55% as the depreciation pushes up the costs of feed and other inputs. Similar pressures are likely in other sectors.

The cost of imported products is likely to rise particularly sharply, and retailers are already struggling to keep up with price movements. Turks trying to buy iPhones and other electronics received error messages online Wednesday, including from the local Apple Inc website (AAPL.O). Read more


Many Turkish manufacturers are heavily dependent on imports of raw materials and intermediate goods for their production. Amid the surge in commodity prices globally, the weakness of the pound is adding a huge financial burden to Turkish businesses.

The unpredictability of exchange rates has led suppliers to halt sales on credit, with many preferring to wait before making new sales. Some vendors don’t even want to sell for cash because they don’t know if they will be able to replace their product at this exchange rate. According to Turkish manufacturers, this could soon lead to product shortages.

Firms that sell domestically with dollar costs and lira revenue suffer the most. Exporting companies, with hard currency earnings, are in a better position but may face a new profitability challenge with customers asking for discounts due to the competitiveness of the lire.

The weakness of the pound will be an additional burden on indebted companies. Data from the central bank show that private sector loan debt abroad stood at $ 171.6 billion at the end of September, with some 60% of debt owed by non-financial corporations.

According to data compiled by economist Haluk Burumcekci, these non-financial corporations have, in September, about $ 52.8 billion in debt that must be repaid or refinanced within 12 months.


The soaring dollar is pushing up the lira value of foreign currency loans, potentially affecting the banking sector’s capital adequacy ratios (CARs).

Some banks may find it difficult to stay above the 12% ratio sought by the Turkish regulator, which is considerably higher than the 8% level considered internationally acceptable.

Bank sources say that to cover the impact of rising loan values, banks would need foreign currency denominated capital, and banks that did not have enough subordinated loans in foreign currencies might have difficulty meeting the requirement. lower limit of the RCA.

Turkish banking watchdog BDDK said banks held $ 160 billion in foreign currency loans as of November 18. increased by almost 40%.

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Reporting by Ebru Tuncay, Ceyda Caglayan and Can Sezer in Istanbul; Written by Daren Butler; Editing by Jonathan Spicer and Dominic Evans

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