GAZIANTEP, Turkey, (Reuters) - Turkey borrowed less than its target in a domestic debt auction in order to avoid paying higher interest rates, Economy Minister Kemal Dervis said on Wednesday, May 23.
The treasury on Tuesday auctioned a net total of 2,162 trillion lira ($1.95 billion) in six- and 10-month papers, well short of its minimum target of 3,100 trillion lira, but at the lowest interest rates yet seen since a financial crisis hit Turkey in late February.
"We did not approach yesterday's auction with the idea of reaching a high total at the cost of raising interest rates," Dervis told reporters during a trip to the southeastern trade center of Gaziantep.
The auction came alongside debt servicing of 3,400 trillion lira.
Dervis, a former World Banker and architect of an economic recovery program that helped Turkey secure some $15.7 billion in international loans, is visiting Gaziantep as part of a plan to explain the economic plan to the public.
The plan demands hefty spending cuts and thorough reform of a variety of sectors, withdrawing state control over areas from tobacco to telecommunications.
Top priority is shake-up of a banking sector which has lead to the issue of $37.8 billion in new domestic debt. That new load has increased the pressure on the treasury to keep the rates at which it borrows low, although investors worry that smaller borrowing will spell trouble in future debt services.
Dervis said the initial $3.9 billion tranche of international lending would assist with the rollover.
"With the help of that we see no difficulties or problems with end-May and June in terms of payments," he said.
Rates in treasury borrowing have fallen from just under 200 percent at the height of the crisis to the 70-75 percent levels Turkey borrowed at on Tuesday.
Turkey plans a voluntary debt swap to extend the maturity of some of its domestic debt and possibly convert it into foreign exchange-based instruments.
Dervis played down the importance of the move.
"It's not essential but extending maturity could be good for both treasury payments, and the banking system," he said.
The upheaval comes as the economy, reeling from a crisis that stripped around 40 percent of the value of the Turkish lira, is expected to contract at least three percent in 2001.
By Hatice Aydogdu
© 2001 Mena Report (www.menareport.com)