The data arrives as a wake-up call, observers argue. The Turkish lira is losing value against the US dollar, and 57.7 percent of the external debt stock is in US dollars -- a concern for Turkish businesses that borrow money in dollars while earning liras.
The long-term external loans of the Turkish private sector rose moderately in September by 6.2 percent, hitting $147.8 billion, while the short-term debt -- excluding commercial loans -- registered a 26.8 percent increase to $39.3 billion.
High foreign debt in Turkey has left it highly exposed to the shift in global capital that any winding down of US Federal Reserve (Fed) bond-buying would bring. Markets generally expect the Fed to announce a tapering of its monthly $85 billion in bond purchases soon in response to signs of growing strength in the economy.
According to the central bank's "Developments in Private Sector's Outstanding Loans Received from Abroad" report released on Monday, Turkish banks' liability in terms of both loans and bonds increased by $4.1 billion and $3.7 billion respectively since the end of 2012. Non-financial institutions' loans decreased by $594 million during the same period.
However, they issued $1.5 billion worth of bonds in the first nine months. Non-financial institutions' loans recorded a decrease of $1.5 billion, while bond liabilities amounted to $2.8 billion, increasing by $1.4 billion with respect to the end of 2012.
Regarding the currency composition of the long-term external debt stock, 57.7 percent was in US dollars and amounted to $85.3 billion, exceeding 60 percent of the non-financial institutions' total external liabilities at $187.113 billion for the first nine-month period. While 35.2 percent was in euros, the share of other currencies amounted to only 7.1 percent.
During August, emerging currencies, especially those of nations relying heavily on cheap dollars to fund large current account deficits (CAD) such as Turkey and India, were hit hard. The Turkish lira hit a record low of TL 2.07 against the US dollar earlier in September.
While it is natural for lending to expand along with an economy, credit has outpaced economic growth in most emerging markets. In China, borrowing by companies surged to 132 percent of gross domestic product (GDP) last year from 104 percent in 2008, according to the World Bank. In Turkey, it jumped to 54 percent from 33 percent and in Brazil to 68 percent from 53 percent. Credit in South Africa exceeded 150 percent of GDP in 2012. Consumer debt is growing just as fast in some countries.
Regarding sectorial distribution of private sector long-term loans, by the end of September, 57.8 percent of the liabilities belonged to non-financial institutions, hitting $85.5 billion. While 62.9 percent of the loans were used in the service sector, 36.6 percent of the loans were spent in the industrial sector. Only 0.5 percent of the loans allocated were for agriculture.
The principal repayments of the private sector's total outstanding loans received from abroad amount to $70.7 billion for the next 12 months as of the end of September, based on a remaining maturity basis.