2023-04-17 10:45:52
Standard & Poor’s Global indicated in a report, Monday, that the tightening of global financing conditions is putting pressure on banking systems in emerging markets, and that the banks of Turkey and Tunisia are most at risk.
The agency expected that Turkish banks would retain their ability to obtain external financing, but with a moderate decline in the benefits of extending loans as long as the government controls the risks of the balance of payments.
“We see that Turkish banks are highly vulnerable to negative market sentiment, increased risk aversion, lower global liquidity and higher funding costs,” the agency’s analysts said in a note.
Turkey’s banks are also still highly vulnerable to the economic imbalances accumulated in the past years, such as the jump in real estate prices and the highly accommodative monetary policy in light of excessive inflation, according to Archyde.com.
The agency also added that the decline of the Turkish lira affects the creditworthiness of Turkish companies.
It is noteworthy that the official Tunisian News Agency (WAT) quoted an official in the International Monetary Fund, Jihad Azour, as saying that the fund did not receive a request from the Tunisian authorities to reconsider its economic reform program, adding that the fund did not impose dictates on Tunisia.
“The Fund did not impose any dictates,” said Azour, director of the Middle East and Central Asia Department at the International Monetary Fund, at a press conference Thursday in Washington, where the IMF and the World Bank held their spring meetings.
Tunisian President Kais Saied expressed his clearest rejection yet of the terms of the stalled bailout of $1.9 billion from the IMF when he said last week he would not accept “dictates” and suggested cutting subsidies might lead to unrest.
Tunisia reached a staff-level agreement with the IMF on the loan in September, but has not really made major commitments, and donors believe that state finances are increasingly diverging from the numbers used to calculate the deal.
Azour said, “The Fund did not respond to a request from the Tunisian authorities to reconsider the reform program prepared by the Tunisians.”
The reform package includes reducing food and energy subsidies, restructuring public companies, and reducing the public sector wage bill.
Without a loan, Tunisia faces a complete balance of payments crisis. Most of the debt is internal but there are external loan payments due later in the year, and credit rating agencies have said the country might default.
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