The decision on interest rates poses problems for Turkish banks

Monetary authorities have surprisingly left the key rate at 17.75%, as announced on Wednesday the policy opinion monetary policy of the central bank. Analysts were expecting an increase of one percentage point. A few minutes later, the investor receipt followed: The Turkish lira lost 4.3% against the US dollar and fell to the euro at a record low of 5.78 lire per euro. The Istanbul stock market lost five percent in value. The central bank itself justified the move with what they believed to be the most balanced economic development.

It would be difficult for the Central Bank to explain this decision, said Timeby Ash, an economist and Turkish expert at Bluebay Asset Management in London. "They have undermined Albayrak's efforts to boost investor confidence," he said shortly after the decision.

It was only in May and June that the central bank raised interest rates to counter creeping inflation up to 15% proceeding. The currencies of many emerging economies are under pressure because the US Federal Reserve has recently indicated that interest rates would rise slightly more rapidly.

The higher the interest rate in the US, the more attractive it becomes for investors to invest their capital in the dollar zone. In addition, there are major political risks, such as the fear of escalating trade disputes, that push investors to bring capital to the United States, considered a safe haven.

With rate hikes, emerging markets are trying to thwart these Maintain stable inflation. However, many of them are in a dilemma: as economic risks rise, rising interest rates could still dampen growth. In China, for example, the central bank has recently relaxed its monetary policy, although private debt is very high and the yuan has depreciated against the dollar.

The Turkish economy is plagued by rising interest rates in neighboring Syria or the imminent escalation between the United States and neighboring Iran. Other problems are home-made. For example, the head of state, Recep Tayyip Erdogan, has further destabilized investors with irritating statements about the independence of the Turkish Central Bank.

In Turkey, the dilemma poses an unpleasant situation, especially for banks. The weakened reading makes foreign loans for Turkish companies more expensive. This makes it difficult for many to repay their debts. This is illustrated by the S & P Global Market Intelligence data available for Handelsblatt. According to the report, the volume of doubtful debts of six Turkish banks has increased significantly

The volume of Ziraat-Bank, held by the State, has increased by 1.5 billion lire compared to the same quarter of the previous year (about 272 million euros). The private bank Yapi Kredi is still at 460 million lire (about 83 million euros). Due to "economic uncertainty and fluctuating currency", the quality of many bank loans in Turkey is likely to "continue to deteriorate" in the future, the experts note.

In addition, many Turkish companies have been doing their shopping in recent years. Most of their acquisitions were financed by dollar loans. For example, Dogus Holding wants to renegotiate $ 2.5 billion in loans. Yildiz Holding plans to reclbadify $ 7 billion. Turkish banks remain at $ 4.8 billion in the Otas group.

Data from the credit insurer Euler Hermes show that the morale of Turkish companies is deteriorating. On average, business partners wait 83 days for payment. "Only in China and Greece, companies have to wait even longer," says the boss of Germany, Ron van het Hof.

More work is now waiting for Finance Minister Albayrak. This includes convincing Erdogan of the independence of the central bank. Not easy: Erdogan is the father-in-law of Albayrak.