Improving Public Debt Management
In the OIC Member Countries
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81% of total domestic debt has fallen about 9 percentage points since 2009. While the share of
domestic banks has been decreasing since 2009, the weight of corporate investors in the
domestic debt market has increased since then (Undersecretariat of Treasury, 2016). In 2015,
68% of total domestic borrowing was raised in fixed interest instruments. 96,3% of total
borrowing was raised in 48 auctions and the remaining 3.7% through direct sales. The average
time to maturity of domestic debt was 4.6 years in 2015 which is more than twice as long as in
2009 (Undersecretariat of Treasury 2016a).
Foreign borrowingSince 2008 the share of external central government debt has increased from 28% to 35% of
total central government debt in 2015, which is still relatively low in comparison to other OIC
member countries (see Figure 435). Around twothirds of Turkey’s external debt is held in
U.S. Dollars. This share has increased by ten percentage points since 2006, while the share of
external debt held in Euros has slightly decreased and amounted to 26% in mid2016. The
average maturity of new external debt commitments was 13.5 years in 2015, which is about
the same level as in 2006, while there have been peaks between 2008 and 2012 when the
average maturity on new external debt commitments exceeded 17 years. Given Turkey’s
current debt structure, the direct interest and exchange rate passthrough are relatively small
(IMF 2016).
As of December 2016, over 73% of Turkey’s stock of external debt consisted of bonds. Only
27% were loans. The majority of creditors are multilateral agencies (18% of the central
government’s total external debt stock) and bilateral lenders (5%). Loans provided by the IMF
have been repaid until 2013 (Undersecretariat of Treasury 2016b).
C) Policy RecommendationsThe institutional framework of public debt management in Turkey generally follows guidelines
proposed by the World Bank and the IMF. There is an independent debt management agency
responsible for debt management located at the Undersecretariat of Treasury, which is the
sole authority responsible for debt management. Debt level, structure and current borrowing
are transparent because the relevant information is made available online on a monthly basis.
There is a mediumterm debt management strategy, which defines targets. Moreover, thanks
to the implementation of the Financial AssetLiability framework, Turkey minimizes the risk of
illiquidity. Thanks to the predominant reliance on debt denominated in Turkish Lira, exchange
rate risk is limited. Interest rate risk is also under control due to the preferred use of fixed
interest instruments.
Turkey is well advised to continue its process of fiscal consolidation and to further reduce its
level of external debt. Given its large and persistent current account deficit, it is even more
important to keep public debt at sustainable levels. To further refine its public debt
management, Turkey might consider publishing numerical targets in addition to just providing
the direction, in which the structure of public debt is intended to move. Finally, it should be
considered to further reduce the reliance on domestic banks. In order to make the economy
more crisisresilient, it is important not to overstress the link between the banking system and
sovereign borrowing because banking crises might turn into sovereign debt crises and vice
versa.
Turkey shares its experience and knowledge in public debt management with partner
countries via its Experience Sharing Program. Information, training and technical assistance on
debt, cash and risk management has been provided to a large number of countries. This
cooperation and assistance might also be intensified within the group of COMCEC countries.