Debt Management 

in a non-Conventional Monetary

Policy World:

Turkish Experience

Mr. Taşkın TEMİZ

DG for Public Finance

Turkish Treasury

June 20, 2013

Washington DC
2

Outline

 Reflections of non-conventional monetary

policies on Turkey

capital flows

monetary policy responses

debt dynamics
Turkish economy has continued to improve since 2002

3

 High level of growth:

• average real growth rate between 2002-2012 is 5.2%

 Strong banking sector:

• capital adequacy ratio of banking sector as of 2012 stands at 17.9%

 Robust fiscal position: 

• average public sector primary balance (imf defined) to GDP ratio between 2003-2012 is 

2.6 %

 Improved debt dynamics:

• general government debt to GDP ratio decreased to 36.1% in 2012 (74% in 2002)

• time to maturity of central government debt increased to 4.6 years in 2012 (<1 year in 

2002)

• Local currency debt as a percentage of central gov’t debt stands at 73% as of 2012 (42% 

in 2002)

• floating rate debt as a percentage of central gov’t debt declined to 40% in 2012 (55% in 

2002)
Like other EMs, capital inflows to Turkey increased 

after AE CBs’ non-conventional policies

(*) As of 31st May, 2013 4

Source: CBRT

-10

-5

0

5

10

15

20

25

2007 2008 2009 2010 2011 2012 2013*

billion USD

Net Flow to Stock Market Net Flow to DIBS Market Total Net Flow
Turkey has been affected by this trend more 

significantly than many other EMs

5

Source: JP Morgan

100

150

200

250

300

350

400

450

500

01-200705-200709-200701-200805-200809-200801-200905-200909-200901-201005-201009-201001-201105-201109-201101-201205-201209-201201-201305-2013

GBI-EM Traded Index Total Return Index Level Local Currency

GBI-EM Turkey Traded Index Total Return Index Level Local Currency
CBRT responded to this change with accommodative 

policies

6

 Objectives

 to sustain price stability

 to maintain financial stability

• exchange rate

• credit growth

 Tools

 policy rate

 liquidity management

 interest rate corridor

 required reserve ratios

 reserve option mechanism 
Depending on the market circumstances, CBRT 

changed liquidity conditions

7

Source: CBRT

0

4

8

12

16

20

24

01-200706-200711-200704-200809-200802-200907-200912-200905-201010-201003-201108-201101-201206-201211-201204-2013

%

O/N Borrowing Rate 1W Repo Rate (Policy Rate) O/N Lending Rate

Start of active use of interest rate corridor

(September 2010) 
.... and increased its FX reserves

(*) As of 31st May, 2013 8

Source: CBRT

0

20

40

60

80

100

120

2007 2008 2009 2010 2011 2012 2013*

billiıon USD

CBRT FX Reserves (million USD)
Treasury’s borrowing cost significantly declined while the 

share of foreign investors in domestic debt increased

9

Source: Treasury, CBRT

0

5

10

15

20

25

30

2006200720082009201020112012

Jan. 2013

Feb. 2013

Mar. 2013

Apr. 2013

%

Non-Resident Share in Domestic Debt Stock Average Borrowing Cost
Yields in all maturities have decreased

10

20

40

60

80

100 2000

3000

4000

5000

6000

7000

8000

9000

10000

4

6

8

10

Vade (Gün)

Dönem Getiri Yield

Maturity

Period
Expected real interest rate fluctuated around zero

11

Source: Treasury

-2

-1

0

1

2

3

4

5

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

Jan-13

Feb-13

Mar-13

%
Foreign participation also enhanced secondary market 

liquidity

Source: Borsa Istanbul 12

0

100

200

300

400

500

600

700

800

900

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

billion TL

BIST Over-the-Counter
Treasury used this opportunity to extend borrowing 

maturities and to concentrate on fixed rate borrowing

13

0

20

40

60

80

100

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011 2012 2013*

months

Share of Floating Rate Borrowing

Share of Fixed Rate Borrowing

Average Maturity of Domestic Borrowing (Right Axis)

(*) As of 31st May, 2013

Source: Treasury
Turkish Government bonds yields

Source: Bloomberg 14

0

1

2

3

4

4

6

8

10

12

08.04.201008.07.201008.10.201008.01.201108.04.201108.07.201108.10.201108.01.201208.04.201208.07.201208.10.201208.01.201308.04.2013

% %

Turkey 2Y Turkey 5Y Turkey 10Y US 10Y (Right Scale)
Challenges Ahead

Source: Bloomberg 15

 How will AE CBs exit their non-conventional monetary 

policies?

 Will EMs lose all of their gains?

 How should debt managers react?
16

 An international monetary coordination is required

 AE CBs should coordinate with other countries on exit of their nonconventional monetary policies

 EMs should implement prudential measures

 Fundamentals

 Fiscal discipline

 Structural reforms

 Monetary Policy

 EM CBs should continue to react to maintain financial stability

 Debt Management

 sensitivity of debt stock to risks (esp. interest rate, exchange rate, and liquidity

risks) should be decreased

Challenges Ahead
17

Turkey’s debt to GDP ratio has significantly declined

35.0

33.0

31.0

32.1

32.8

32.7

36.1 35.8

30

34

38

42

46

2008 2009 2010 2011 2012 2013 2014 2015 General Government Debt Stock / GDP(%)

Baseline Scenario Exchange Rate Shock (10%) Growth Shock (2 points)

Interest Rate Shock (500 bp) Combined Shock

(*) 2013-2015: MTP Projections
18

sensitivity of debt stock to macrofiscal shocks 

decreased 

2001 2012

Change in real exchange rate app/dep

by 5 percentage points 

+ / - 2.2 points + / - 0.5 points

Change in TL interest rate by*

 10 percent + / - 2.0 points + / - 0.2 points

 25 percent + / - 5.0 points + / - 0.5 points

Change in GDP growth rate by 

2 percentage points 

+ / - 1.5 points + / - 0.7 points

Source: Treasury
19

Domestic Market Roll-Over Ratio

Source: Treasury

70

80

90

100

110

120

2004 2005 2006 2007 2008 2009 2010 2011 2012

%

Domestic Market Roll-Over Ratio (Turkey)
20

Duration of Domestic Debt Stock Held by Foreign

Investors

(*) As of September 2012

Source: CBRT

0

1

2

3

4

5

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*

year

Duration of Debt Stock Held by International Investors (Turkey)
21

Total Securities to Total Assets Ratio of Banking Sector

(*) As of April 2013

Source: BRSA

10

20

30

40

50

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*

%

Total Securities to Total Assets Ratio of Banking Sector (Turkey)