Turkish bond prices continue falling, gov’t to adopt measures

NEW YORK/ANKARA (Reuters) – Turkish sovereign bond prices fell for the second consecutive session yesterday as Wall Street questioned the country’s economic viability as hopes for a major US-backed financial aid package faded. Despite approval from Turkey’s Parliament allowing overflights by US warplanes, the country’s debt fell 2 percent in total returns, extending losses to more than 9 percent since Jan. 1. The wider emerging debt market dropped 0.27 percent in a bout of profit-taking after a 5.8 percent year-to-date rally. The parliamentary approval fell short of the help Turkey had been asked to give the United States in its campaign to topple Iraqi President Saddam Hussein. «Turkey is not viable without significant financial assistance… You don’t get money for air space,» said Mike Conelius, manager of the T. Rowe Price Emerging Markets Fund. Turkish-US ties had already been strained by the failure of an earlier plan to send 62,000 US troops into northern Iraq through Turkey. The United States made it clear that with the collapse of the first plan Turkey had forfeited a $6 billion US grant to help shield it against war-related economic damage. Wall Street sees the financial aid as necessary if Turkey is to shoulder its huge debt load while binding up fiscal accounts battered by the drop in the nation’s tourism sector. «There is still a chance that they may back into some support,» Conelius said. «But by failing to support the United States to the extent that they had promised, they may have signed their own fiscal death warrant.» According to a Reuters dispatch from Ankara, Economy Minister Ali Babacan said yesterday that Turkey was ready to take additional economic steps to minimize the impact on its fragile economy of war in neighboring Iraq. Babacan told Reuters in an interview shortly before US strikes against Iraq began that Turkey would stick by the terms of a $16 billion IMF loan deal. He said he expected the fund to meet in early April to discuss payments to Turkey. Turkey needs the IMF support to handle repayments on a domestic debt load that Babacan said would not pose a problem. Meanwhile, a tanker of 600,000 barrel capacity was loading Iraqi crude oil at Turkey’s Mediterranean port of Ceyhan yesterday morning after the US invasion to Iraq, a shipping source told Reuters. «The tanker named Caithness is loading at the moment,» the source at Ceyhan said. The pipeline ending at Ceyhan is the only outlet for Iraqi crude exports after UN oil inspectors left Iraq following suspension of the oil-for-food program, effectively halting exports via Mina El-Bakr. A Turkish energy official told Reuters earlier yesterday that Turkey would not shut the pipeline unless Iraq, under US attack, decided to halt oil pumping. «Oil is still flowing and we don’t intend to shut the pipeline,» said the official, who sought anonymity. One of the two pipelines to Ceyhan was running below its daily capacity of 750,000 barrels.

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