US embassy cable - 03ANKARA822

UNCLAS ANKARA 000822 
 
SIPDIS 
 
 
SENSITIVE 
 
 
STATE FOR E, EB/IFD/OMA AND EUR/SE 
TREASURY FOR OASIA - MILLS AND LEICHTER 
STATE PASS USTR - NOVELLI AND BIRDSEY 
 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, PREL, TU 
SUBJECT: TURKEY'S $3.3 BILLION DEBT SERVICE ON FEB. 5; 
TREASURY'S REVISED INTEREST RATE PROJECTIONS FOR 2003 
 
 
REF: ANKARA 752 
 
 
Sensitive but unclassified.  Not for internet distribution. 
 
 
1.  (U) Turkish Treasury released its February Domestic Debt 
Service schedule on January 31, showing a monthly total of TL 
6.8 quadrillion ($4.1 billion), of which TL 5.6 quadrillion 
is to be paid on February 5. Given the ten-day holiday in the 
middle of the month, during which another TL 0.8 quadrillion 
is due, the entire borrowing burden for the month falls in 
the first week. 
 
 
2.  (SBU) Treasury's goal is to raise at least TL 4.5 
quadrillion (about $2.8 billion) in T-bill auctions on 
February 4, according to  Deputy DG Volkan Taskin.  He told 
us this is the minimum amount needed.   Other sources that 
will be tapped to meet February debt service include: 
 
 
-- External borrowing of $350 million announced on January 31 
(a re-opening of the 2008 maturity dollar bond launched 
November 7). 
-- Treasury's cash account, currently at TL 5.2 quadrillion 
(though much of this is needed to pay GOT salaries and make 
external debt service payments in February). 
 
 
3.  (SBU) Volkan also provided Treasury's latest projections 
for 2003 domestic borrowing, after the January 28 Higher 
Planning Council decisions on 2003 budget aggregates 
(reftel). 
 
 
--  Average nominal interest rate on fixed rate lira 
T-bills:  43 percent. 
--  Market roll-over rate:  93 percent; 
total roll-over rate: 87 percent. 
--  Average maturity of new fixed rate T-bills: 8 months. 
--  Assumptions: $4.5 billion in Eurobonds; $1.7 billion in 
IMF disbursements.  U.S. bilateral aid not assumed. 
 
 
4.  (SBU) Taskin said Treasury has told the GOT that to get 
the 43 percent average interest rate over 2003 will require 
full implementation of the IMF program, and good timing on 
the Iraq crisis.  Treasury expects interest rates to decline 
after the Iraq crisis, but to stay at current levels or even 
higher until then.  To get the sharp declines needed after 
Iraq, the GOT needs to have its economic reform policies in 
order, per Taskin. 
 
 
5.  (SBU) Comment:  One potential problem for the February 4 
t-bill auctions will be the February 3 release of January 
inflation data - some market analysts are predicting CPI to 
come in very high, in the 3-4 percent range. 
PEARSON