Turkish banks sign debt plan

ISTANBUL – Turkey’s troubled banks on Friday signed a World Bank-backed plan to restructure debt owed by Turkish companies that has stacked up since economic crisis struck last year. The overcrowded banking sector was at the core of a financial crisis in February 2001 that slashed the value of the lira currency by about half and sparked a massive recession in which the economy shrank by 9.4 percent last year. It was not immediately clear how many of Turkey’s banks had signed by Friday’s deadline the much-awaited agreement Ankara hopes will help Turkey achieve a three percent economic growth target for 2002. «This is not the last chance to sign. Those who haven’t signed the framework agreement and wish to sign it can do so later,» Ekrem Keskin, head of the Turkish Banks Association, told Reuters. All of Turkey’s banks – three state banks and 43 commercial banks – and other financial institutions who lend capital have been asked to sign the plan, and the banking watchdog will release the names of those who have enlisted tomorrow. The International Monetary Fund has paid or pledged a total of $31 billion in loans in return for bank reform and other measures to steer the country back to growth. The World Bank has earmarked $500 million for the plan, the so-called Istanbul Approach, that would allow viable firms to restructure loans carrying conditions they cannot meet after the crisis triggered soaring interest rates. The aim is that once banks are freed from the burden of that expensive debt and renegotiate payments carrying lower rates and longer maturities, they can increase lending and investment to help Turkey pull out of recession. But analysts have said the project, backed by the Turkish Banks Association, may need more money than the World Bank loan, part of the institution’s more than $6 billion loan pact with Turkey. The size of the firms’ total bad loans remains unclear. The plan had been due to go into operation earlier this year, but the technicalities of loans at hundreds of companies slowed the process. Meanwhile, Turkey’s currency on Friday hit a 2002 low against the dollar, extending Thursday’s fall when Prime Minister Bulent Ecevit’s absence at a key meeting fueled speculation he may step down due to ill health. Stocks and bonds also slid as investors worried Ecevit, back at home after 10 days in an Ankara hospital, may have to step aside – a move they fear may spark early polls as Turkey works to implement a $16 billion IMF pact and divisive EU reforms. The lira slid to best bids of 1,448,000 to the dollar on the interbank market from Thursday’s 1,427,000, beating a previous 2002 low set on January 2 at 1,447,000 as concern mounted that Ecevit’s departure would leave a political void. The busiest April 9, 2003 bonds weakened to yields of 63.34 percent from a previous 59.41 percent and the main stock index closed down 0.9 percent at 10,413.7 points after falling some 3 percent on Thursday. «The market is expecting Ecevit to surrender his duties. Investors are in waiting mode and there’s very little trade on the stock market,» said Murat Oku of Oncu Securities in Istanbul. A Reuters poll of 47 analysts on Friday overwhelmingly predicted the government would call polls next year without seeing out its full term, due to end in the spring of 2004.